Warnings of Recession

Member since 2019 · 5 posts · 29 votes

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?

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

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?

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Gina Cardarella
Rental Property Investor · Los Angeles, CA · Member since 2019 · 111 posts · 38 votes
7y
@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
0 Reply
Robert Schmitt
Minneapolis, MN · Member since 2019 · 11 posts · 13 votes
7y
@Gadiel Del Orbe Unless your last name is Buffett, don't try to time (beat) markets. For mere mortals, time in the market wins out consistently.
2 Reply
Joseph Falco
Member since 2018 · 6 posts · 5 votes
7y
@Russell Brazil great answer !
1 Reply
Storm S.
Real Estate Agent · Santa Barbara, CA · Member since 2016 · 518 posts · 283 votes
7y
@Gadiel Del Orbe is I think multifamily has about 2-4 more years before we the peak at least in my area.
0 Reply
Dustin Thoms
Investor · Sumner, WA · Member since 2019 · 24 posts · 14 votes
7y
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**
1 Reply
Raul Dinzey
Rental Property Investor · GA · Member since 2018 · 3 posts · 2 votes
7y
@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.
2 Reply
Haseeb M.
Real Estate Agent · Hoffman Estates, IL · Member since 2017 · 90 posts · 68 votes
7y
@Gadiel Del Orbe
Courage is being afraid to death, but doing it anyway!
Looking back you will be glad you did...
1 Reply
Ryan Dossey
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
7y
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.

3 Reply
Brent Paul
Rental Property Investor · Shakopee, MN · Member since 2015 · 985 posts · 374 votes
7y
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.
1 Reply
Nathan Hall
Rental Property Investor · Martinsburg, WV · Member since 2017 · 111 posts · 81 votes
7y
@Michael Ealy have you had any success in forcing appreciation on 4 unit or less properties? Or is this idea unicorn hunting?
0 Reply
Alex KhanPro Member
Specialist · Southeast Michigan · Member since 2015 · 300 posts · 244 votes
7y
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?”
248-979-8119
0 Reply
Bryan Clement
Rental Property Investor · Union, ME · Member since 2018 · 161 posts · 104 votes
7y
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?

0 Reply
Long Nguyen
Rental Property Investor · fresno · Member since 2019 · 15 posts · 4 votes
7y
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!!
2 Reply
Jess White
Rental Property Investor · San Jose, CA · Member since 2018 · 152 posts · 159 votes
7y
@Russell Brazil Dang. That’s good.
0 Reply
Gualter Amarelo
Investor · Fall River, MA · Member since 2014 · 399 posts · 300 votes
7y
@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!
0 Reply
Jackson Hulgan
Rental Property Investor · Albertville, AL · Member since 2019 · 18 posts · 11 votes
7y
@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.
3 Reply
Amanda Kessler
Member since 2019 · 111 posts · 36 votes
7y
The worst thing you can try to do is time the market. People try and time it and end up losing thousands.
1 Reply
Michael Ealy
Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
7y
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.
1 Reply
Ola Dantis
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
7y
@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! 🤗🤗🤗
1 Reply
Steve Forsyth
Rental Property Investor · Member since 2019 · 1 post · 0 votes
7y
You make your money when you buy. So work to get a good deal. And when the recession comes, people still need a place to live. So your duplex may be just the place.
Steve
0 Reply
Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
7y
"Nothing is more expensive than a missed opportunity"
Don't wait for timing dive in and it'll all come together. Best of luck!
1 Reply
Joe R.
Developer · Chicago · Member since 2019 · 16 posts · 4 votes
7y
The best time to invest is always now. No one knows when the markets are gonna take a turn for the good or bad, or which market it will be. There is always a bubble or recession looming somewhere. Like many have said here, focus on the fundamentals of the property and the cash flow associated.
0 Reply
Luka Milicevic
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
7y
The recession will start on 7/9/2020 at 3:25PM central time.
You heard it here first!
2 Reply
Michael Ealy
Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
7y
Originally posted by @Jay Hinrichs:
Originally posted by @Michael Ealy:
Originally posted by @Josh C.:
@Michael Ealy
Just looking for clarification, you bought a quarter of all the apartments that were sale in 2013? In America? Thanks.

No, sorry. Me and my partner bought 28% of apartment inventory in Cincinnati, Ohio.
was that 1 out of 4 apartments that came on the market during that time or literally you and your partners own 25% of all standing MF in that city ? impressive either way.
this reminds me of a time years ago.. during the first real run up.. mid 80s on the west coast.. were 100k houses in SF bay area popped to 300 to 500k still a huge number in those days.
So I was up at Whistler in BC skiing and going up the chair lift with a nice couple from Vancouver.. and we talk about real estate at that time the Hong Kong Chineese were making a very serious run at every thing Vancouver getting ready for the 89 termination of British influence in Hong Kong and the prices were going up.. that couple said to me.. we are just going to wait for the prices to come back down.. and we were talking about nice SFRs in Vancouver at 200 to 300k.. well now same houses are 2 mil to 3 mil.. they never came back down.. and I don't know if that nice young couple ever pulled the trigger.. but I told them based on my experience in the SF bay area and the pacific rim buyer influencing our market I would not count on a big retreat in prices.. Of course they can happen but then at least as it realates to owner occ SF it seems to make new highs in the very strong coastal markets.. not so much in the middle of the country with Denver and north side of Chicago as exceptions..

28% of apartments that was put on the market during that year.
Yeah, it was a buying frenzy for me and my partner because at that time, a few investors were buying and we got our acquisition, renovation and property management "machine" set up.

1 Reply
Account Closed
Attorney · Sacramento, CA · Member since 2014 · 300 posts · 172 votes
7y
In the words of the annoying Jim Cramer, "buy, buy, BUY!"
1 Reply

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