What if a recession is really coming in 2019?

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What if a recession is really coming in 2019?

Shanese Francis
Rental Property Investor · Atlanta, GA · Member since 2018 · 15 posts · 24 votes

With the stock market ending their worst quarter since 2008, there has been much talk about a recession in the near future. I understand that recessions are highly unpredictable, no matter how much research is put into place. Are there any precautions being taken by advanced REI to navigate in this uncertain economy? Is there anyone who was investing during our last recession, what were some strategies you put in place to secure your ROIs?

BTW: I'm a new investor looking to buy a duplex and house-hack! I'm currently in my learning stages. 

 Another Warning That A 2019 Recession Is Coming

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y

Who cares if we are in a growth period or a recession? You need to build a business that flourishes in any environment.

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  • Kyler Cook
    Rental Property Investor · Kalamazoo, MI · Member since 2018 · 117 posts · 235 votes
    7y

    @Shanese Francis

    I’m in the same place as you looking to househack a duplex! I have a very close friend that lost everything in 2008 because he was extremely over leveraged, and the steps that he’s taken to prevent a similar occurrence is to have over 30% equity into every investment so that he’s not over leveraged. Depending on your ability, you should have less leveraged as things start to feel “too good to be true” in the market. Begin to leverage again when rates lower here in about 3-5years, and buy like wild when houses are down 40%. It’s all about doing what Warren Buffet says. Be greedy when others are fearful, and fearful when others are greedy. In my market in Kalamazoo MI, there were people offering 15k over asking day of sight unseen. I will only by off market at this time, and am paying off student loan debt and building liquid capital for when the market softens and the math makes sense.

    34Reply
  • Leo Poon
    Rental Property Investor · Queens, NY · Member since 2018 · 99 posts · 70 votes
    7y

    @Shanese Francis

    When you are buying REOs for pennies on a dollar, and rent it out. You can care less when recession comes. But if you are buying duplex for 300k that rent for a total of 1.5k. All I can say is good luck.

    In addition, if you are over leveraged, meaning you borrowed most of your money to invest in retail priced properties, then you are putting yourself in greater risk of defaulting. If you bought it with most of your money, you can ride out the recession but with a low ROI and maybe lower home price depending they property's location.

    Recession is a good time to buy properties for pennies on a dollar if you have the cash.

    27Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    7y

    People still have jobs in recessions ansld they still need to live somewhere....

    And you as a savvy investor have cash/credit reserves to float you through vacancies and or repairs...

    Real estate is so locally you really need to understand and be able to serive your market. If you're able to do that then you should be able to ride out a downturn because again...you know what your market is likely to do and you have reserves as a backup.

    What you don't want to do is be living paycheck to paycheck dumping 10's of thosuands into random turnkey chasing a few hundered if that each mo...

    19Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    7y

    Search "recession" in the forums.  We have been discussing this topic for four years.

    35Reply
  • Account Closed
    Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes
    7y

    Back in 2001, Warren Buffet said predicting rain doesn't count. Building arks does.  Be prepared for a recession (other posts on this thread have explained how) and ignore the predictions of when the next one might happen.

    After a large market selloff in the 1990s, several gurus were asked about what was next. The best answer came from Dear Abby: "Dear Abby doesn't comment on the stock market except for this. Don't listen to the experts. The proof. Some experts lose their shirts."

    13Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    Losing properties in a recession has nothing to do with leverage. It is all about not having adequate reserve funds. Too many investors get into the game depending on their rental income to cover all their costs all the time and fail to plan for major expense or extended vacancies. 

    I keep my properties leveraged to the max but always have the reserves to carry every property long term. A recession will only cause moderate fluctuations in rentals and for that reason having adequate reserves negates any issues with leverage.

    If financing is the cause of a failure in rental property investing during a recession you simply did not plan ahead.

    33Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Shanese Francis. Well I’m deleveraging some. Buying under market property for cash and getting into the lending side at favorable LTVs. Recession will likely come in under 2 years but that doesn’t mean unemployment will spike.

    2Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    7y

    I've been anticipating this since November 2016, hang tight folks. 

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    Recessions are like children each is unique and special.. so when and if we get into another one depending how deep it is there will be unique and special opportunities .. those that thought they were bullet proof may suffer those that are worried there market carried them through or lack of debt kept the banks away.. 

    we just don't know what we don't know..  

    Risk in my mind is mortgages that are due and cant be rolled over. 

    Mortgages that reset and rents did not follow.

    that type of thing.. 

    but all in all it usually boils down to jobs.. and the job market is pretty strong still.

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    19Reply
  • Lee Bell
    Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes
    7y

    Recession is local. Maybe not to the extent that RE is, but...

    4Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    I’m sure there’s a recession coming eventually but perhaps it will be mild compared to past ones . We have learned a lot and changed lending and buying practices since the 08 crash .

    4Reply
  • Craig CurelopBusiness Member
    Real Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Shanese Francis - Buy investment properties that cash flow. If the market goes up, great! If the market tanks, your cash flow will cover your mortgage and your expenses and you can hold on. 

    The people who purchased real estate smart in 2008, did not get burned. They are very wealthy right now. It's the people that bought personal property they could not afford, rental property that did not cash flow, or got scared and sold before the market returned. 

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    18Reply
  • Junior Soares
    Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes
    7y
    @Shanese Francis When there is blood in the streets is when money is made!
    5Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    Who cares if we are in a growth period or a recession? You need to build a business that flourishes in any environment.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    43Reply
  • Charles Kao
    Specialist · Grand Rapids, MI · Member since 2016 · 1k+ posts · 611 votes
    7y

    @Russell Brazil @Shanese Francis

    I have seen this post like 500 times and people like Russell who respond to these posts keep saying essentially the same thing but in fewer words. Read the 500 other posts if you want or act but there is always a risk in real estate but with due diligence and hedging against the worst scenario your business if anything should thrive during a down economy. I personally would welcome a downturn and am prepared for it. I am not investing in secondary markets anymore and expanded into asset classes that historically have down well even in a downturn.

    5Reply
  • Brian Ellis
    Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Shanese Francis for new investors like me, a recession could get scary. Lots of leverage, and rental income from one investment property isn't going to cover both my mortgages. Back in 2008 my families manufacturing company laid off 100 ppl and by 2014 we were down to 24. A couple of our largest customers filed chapter 11 back then and stuck us for hundreds of thousands of dollars. We managed to survive and are now in a growth stage again, but if things took another turn for the worst, and the same thing happened id be in rough shape. Let's say I ended up with No job, 2 mortgages, Vacancy, and a HELOC rate through the roof. I'd have to find a way to make it work. Only thing I can do right now is save, save, save. And be proactive with my current REI. No one is exempt from being affected by a recession , Everyone's situation is different. If you plan on house hacking, you are in a lot better shape then most homeowners.

    6Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    7y

    1. Make sure your loans are long term fixed

    2. Have ample reserve funds (I suggest 9+ months of principal and interest payments)

    3. Keep leverage 75% or less

    4. Buy for cash flow with a value add to increase equity

    5. Buy in growing economies 

    25Reply
  • Terry Lao
    Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes
    7y

    If the recession is coming in 2019, then I will be selling my rentals, and taking profits. Then build my war chest , as the market goes lower and lower. Wait for the bottom or near bottom before buying 4plexs. It would be funny if I bought the same 4plex that I sold. More than likely, different 4plex but in the same complex.

    Terry

    3Reply
  • Llewelyn A.
    Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes
    7y

    I've been investing as if the recession is always coming! And I have been Investing for 21 years!

    So when the recession actually comes.... any losses are very minimal.

    What I really care about are my tenants and how they are doing. I really hate to have good people who are my tenants lose their job which then jeopardizes their ability to pay rent.

    What I do is to form strategies with them in order to help them along the way. For instance, doing an AirBnB in one of their non-occupied rooms, taking on a 3rd Roommate, or even hiring them to do some of the Property Management stuff.

    I also consider certain Cities such as NYC to be able to weather the recession quite well. So yes, I can always find a new tenant because of the low vacancy rates here (around 3%), but I consider my tenants as customers, which is why I'm willing to help them personally.

    The combination of having a location where the Vacancy Rates are so low, very good job market (don't forget about Amazon's HQ2 coming to NYC), AND helping my current tenants have always worked, even in the Great Recession.  

    22Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    @Shanese Francis I HOPE it happens soon because I'm tired of reading about it on this website and I'm ready to buy some cheap properties....
    24Reply
  • Robert Ernest goodwin
    Rental Property Investor · Wakefield, MA · Member since 2018 · 1 post · 0 votes
    7y

    @Craig Curelop

    Seems logical to me

    0Reply
  • Daulton H.
    Rental Property Investor · SC · Member since 2017 · 37 posts · 35 votes
    7y

    Shanese, don't over-leverage. Buy properties that cash flow. Build a reserve. Be willing to help your customers (tenants) when or if they get into a tight spot. I recently helped one of mine through two months of no pay via creative thinking.  He now has a great job and continues to be a great tenant as he always has been. 

    8Reply
  • Igor T.
    Cleveland, OH · Member since 2018 · 61 posts · 21 votes
    7y

    @Shanese Francis

    If you think the recession is coming. You can hedge it by buying puts on a stock market, including real estate ETFs and trusts.

    1Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    7y

    I don't give any thought to a recession or what the market is doing. In my experience, if you have identified buying criteria that work for you, you prepare yourself to buy when an opportunity presents itself. That happens regularly in any market. The key really is to know what you are looking for, be ready and to recognize when an opportunity is there. That last one is the toughest one to do, especially for new investors. 

    2Reply
  • Jess White
    Rental Property Investor · San Jose, CA · Member since 2018 · 152 posts · 159 votes
    7y
    @Shanese Francis Step 1.) Don’t listen to Robert Kiyosaki Step 2.) Don’t listen to Robert Kiyosaki Remember the mantra, “Even a broken clock is right twice a day.” If you get a thousand gorillas in a room to flip a coin ten times, chances are, there will be a few In that room that flip heads ten times in a row. Does this make them a genius? No. Just because one guru predicted a downturn or recession once, that doesn’t make them all knowing. Economy’s go up, and economies go down. Make your portfolio bullet proof and you will never have to worry about this kind of thing. Like many have said before, find a deal that works in any market. I think getting a deal for 30% under market value is a great rule of thumb, however, it can be challenging- but that’s what makes it a deal.
    5Reply
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