Warnings of Recession

140 Replies

@Gadiel Del Orbe just understand that EVERY SINGLE PERSON on BP has felt similar fear going into at least one of their deals. Be it their first deal or one with skinnier margins than they’re used to, everyone has experienced trepidation at some point in their investing careers.

As others have mentioned, make sure your fundamentals are in place and then you just have to jump in. You may not hit a home run on your first deal, but at least you’re at the plate taking some swings.

@Gadiel Del Orbe

Hi this will only be my 2nd investment property but I'm actually looking to leave Los Angeles and buy property out a state where cash flow and cap rate seemed to look more attractive still studying the different areas but that's my take

Was it the treasury department making this statement or just historical trending of the the inversion of the 2 and 10 year yield?  I usually listen to the business news each morning and know about the yield inversion but have not heard about the treasury department making a statement.  Anyway, real estate is long term and having a slowing or downturn in housing pricing is good for the investor.  To drop out of a good deal, if it was a good deal, because of a propagandist remark might not be too well thought out.  The FOMC is predicted to do its job and keep the economy out of a recession and lower the bank funding rate which should lower the 10 year below the 2 year (as of today they were neck and neck).  Good job growth and low unemployment will also keep the market going.  

So in summary, invest in real estate if only you can handle the ups and down of the economy but understand that it is a long term relationship.  

**stepping off soap box**

@Gadiel Del Orbe

Gabriel prices for homes right now are high. Right now in the Washington DC market its high, I am going to guess it's the same in the LA market?

The bottom line:

A duplex sounds good. If it's a good desl, please don't let it slip away. My opinion is that Paying rent is a waste of money. Rent will keep going up but your mortgage will stay almost the same. The variations are the property may taxes may go up. If you can afford it now and it's a good deal please consider owning, not renting unless you are house hacking.

Background information:

When the market crashed about 10 years ago, the last time the values of homes went down and people that purchased their properties between 2004 to 2008 paud too much and were then paying a mortgage on a house that was only worth half of what they purchased. Under water they were calling it.

Originally posted by @Russell Brazil :

If you dont have the courage to buy during the hottest economy ever, why do you think you will have the courage to buy during a recession?

FREAKING GOLD. 

All of the I can't wait for it to crash crowd... Are seriously missing out. Not to mention... I don't think will have the confidence to strike when they need to. 

 

I am getting tired of hearing about it in the news every 3 months.  There are those that wait for it to happen and those that go out and get those deals right now.   Nobody knows what is going to happen next year or 5 years from now.  However if you let a good deal go by because you are worried about a recession you will be kicking yourself for missing out on it.  Run your numbers and make sure it makes sense to you.  Buying something with negative cash flow and hoping for appreciation is a good way to set yourself up for failure.

Originally posted by @Gadiel Del Orbe :

I'm currently renting in Los Angeles and the rents are super high. I want to buy a property, but I am a little afraid especially after the treasury department said we are looking at early signs of a recession. I was working on buying a duplex for my first property, but the news stopped me. What should I do? Should I wait to see what happens? or Should I still buy? As a first-timer what do you recommend I do?

 Go for it and don’t look back. You shouldn’t even be asking. “What should I do?” 

So what you have to realize is that the technical term for "Recession" is extremely loose. All it means is having two consecutive quarters of declining GDP. There were a couple different "recessions" in the early 1990's that no one talks about now because they were not that major. Now, sure, business will slow, properties might not appreciate and cash flow may not be the manna from heaven you were expecting, but just be smart, save up money and pay down excess debt that's not making you money (like car debt) and worry more about growing your portfolio to be recession proof, than trying to predict whether or not there will be one.

Originally posted by @Gadiel Del Orbe :

I'm currently renting in Los Angeles and the rents are super high. I want to buy a property, but I am a little afraid especially after the treasury department said we are looking at early signs of a recession. I was working on buying a duplex for my first property, but the news stopped me. What should I do? Should I wait to see what happens? or Should I still buy? As a first-timer what do you recommend I do?

 

Im glad i found this post. Im trying to invest in multifamily homes but was a bit skeptical because of the news of a potential recession. I think i found my answer. This forum is awesome!!

@Gadiel Del Orbe as long as the building cashflows and you can maintain or cover the rents in the case of vacancies there really is no concern with buying real estate.

The key is cashflow and from what I hear from my buddies in LA... there isnt much for cashflow out there, but if you get an hour away from the city your options open up vastly.

I wrote the book, "broke to a quarter-million" and the whole time I was building my little portfolio I thought the market was about to crash...

Like someone said above, we've been calling recession for the last 5 years, but still buying for cashflow.

Find cashflow and buy.

Cheers to your success!

@Gadiel Del Orbe

If you’re able to get an idea of how much you think your duplex will go down in value with this potential recession you can work that into your numbers and still be safe. Get enough equity in the deal so that you don’t worry about losing it to the bank or other lender. Pay cash and that won’t be a problem to consider.

If you’re getting 100% market rent on both units while netting 30% more than the mortgage payment and all other expenses then the market can drop a whole 30% (which is massive) which will only result in you breaking even. You would still have a property that is being payed down and will have cash flow until the bottom of the market.

Originally posted by @Nathan Hall :

@Michael Ealy have you had any success in forcing appreciation on 4 unit or less properties? Or is this idea unicorn hunting?

The "forced" appreciation for 4 unit or less is really similar to flipping houses. You need to know the ARV based on CMAs and then buy well below market value, do the rehab and get the price up to market value.

@Gadiel Del Orbe 

Remember this, when you watch the News, it is usually never good news. 

So, to answer your question: What do you recommend I do

Do not believe everything you hear on TV! 🤗🤗🤗