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?
I have always enjoyed Russell's perspective. But, I have now fallen madly in love with Russell...
Yes, I said it!
There are always deals to be had even in a hot market, you just have to grind a lot more to get them. If you buy right unless something catastrophic happens with the economy you can weather a recession and still not be upside down. I should add a disclaimer though, I invest in Louisville, KY where the ups and downs are not nearly as dramatic as they can be in the coastal cities. I would imagine though if you can buy/rehab at 60 to 70% ARV minus repairs you should still be pretty good.
Go for it! Make sure the duplex is in a good area and that rents aren't all the way at their potential. Also, look for a value-add property if you're still nervous. You'll do fine! Call anyone of these investors and they'll surely give you all the reinforcement you need to make a go at this.
If you're going to buy a property that you plan to hold on to during a downturn, just pay really close attention to:
1. How much value is the property poised to lose, if any, during a recession? At the peak of a market, I like less volatile markets, and seek out the least volatile assets within those markets that still meet my purchase criteria. Big cities tend to go up and down more during market changes than smaller markets. Nicer neighborhoods tend to go up and down more during market changes than working class areas. CA tends to go up and down more than midwestern and southern states.
2. How is my property going to perform today, and through the crash, from a cash flow perspective? If i'm buying property at the peak, I want to hyper-compensate for that by means of earning the highest yield possible. If I'm going to be stuck with something until the market goes down and back up again, I want my bank account to be happy that I'm stuck with it.
If you REALLY want to be a homeowner now, and perhaps take advantage of the ridiculously low interest rates, a duplex might make sense. Just make sure you're ok with what you're paying to buy it, and the monthly yield it produces, regardless of its value. At the very least, assess the property w/ respect to the 2 points made above, just so that you are aware of what you're getting into, and make sure you accept the possible "risks" associated.
I personally wouldn't buy anything new in CA at this point in time. I just picked up a small MFR value add project in Indiana, though (and even that was purchased at about 40% of current market value). It'll cash flow great if I keep it, and has a huge equity chunk that keeps me safe. Honestly though, I'll still probably sell it to someone else that likes it's cash flow more than I do.
I think it's still a great time to do deals, just be a bit conservative and be poised to ride the waves ahead without tipping over, ya know?
Find someone who tried to help a friend or family member out by renting to them. You know the cousin who decided to raise pit bulls for a living in the back bedroom to support his meth habit. Replace the floors. spend a couple months running back and fourth to Home Depot. POW!!! you just doubled your net worth.
Yes the market could crash and your net worth only increases 25%. Just drop your rents a hundred bucks and grab up some bargains during the panic. Use some of your of your extra income to help out your friends who were in the stock market.
Homes in the Hood
There have been signs of a market top for the last 3 years. There are deals in every market. We are closer to a top than a bottom, but there are still deals.
If you are buying a duplex that you plan to live in then it doesn't really matter if a recession hits - in fact, even if the home loses some value you would still be better off than if you just keep renting. Use those payments to earn equity instead.
Jump in, make sure you find a good deal and you'll be fine. It will take time for you to find a deal but pull the trigger once you find it. Think long term and you'll be fine
My answer is going to be a lot less technical and easier to understand than every one else that has posted ... Here you go ... Being a Real Estate investor in many ways is like making a decision to have kids .. There are unknowns but if you believe and have a desire to put the hard work
In you will be proud to be both a dad and a successful investor
There has been a mention of a recession every year since 2012. If anything it's a trumpcession, all it takes is for a trade deal to be made and back to the moon we go. We are a long ways from the overall GDP contracting two quarters in a row.
So how much of a depreciation in value are we looking at for multifamily homes if a recession does occur? Does it depend on the area? Just trying to gauge the number so i can factor this into my next purchase as I am in the process of buying
2008 was terrific for my rentals. It really saved my bacon.
Wish I had a crystal ball.....
This is what I do, don't feed the debt monster, in other manage debt, and make sure your cashflow is sufficient to cover the bumps along the way
When I bought my first investment property in 2013.. these same threads of worrying about a recession started popping up. Now, after lots of amazing life experiences, lessons learned, and a modest 7 figures or so of equity / profit net has been created, I'm still seeing the same threads. Coincidence?
The first post should be a FACT and CRAP game:
FACT: There WILL BE A RECESSION again....numerous recessions in fact, over the coming decades. It's a natural part of most economies. This is based on the FACT that the definition of a recession, economically speaking, is simply a fall in GDP in two successive quarters. You just need to be educated on what a recession is to get over the FEAR of what you believe it to be. There have been 10 recessions since the 1950's. Nearly 50 of them since the early to mid 1800's.
Here is the CRAP: Media is based on the philosophy of "if it bleeds it leads" and FEAR talk provides a better news cycle of drawing an audience in than "hey, a downturn in the economy may be coming, get ready for deals!" This is why all of the talking heads on the news keep spitting out recession, recession, recession. They are playing to peoples fears of what they may have experienced in the last one.
Reality: The type, severity, and length of a recession is near impossible to predict or time. Not all recessions are a real estate recession like 2009/10. Not all recessions hit the same communities and metros the same. Rates may be up OR down in recession periods. Jobs do tend to be effected, but not equally across all industries, locations, or employee type.
So, all I can recommend @Gadiel Del Orbe is that you focus on what you can control. Do your research, analyze more deals, beef up your credit, save money, cut expenses, and when you find or make a great deal, act on it immediately! You can make deals happen in any market, that's the beauty of real estate investing. Hope this helps.
Well, here is the recession some of us were talking of—not necessarily predicting—not long ago. You could argue Covid-19 was the catalyst for a recession-in-waiting. It amazes me how pundits completely ignore this possibility. It seems such an obvious assumption.
It can't have escaped anyone's notice that financial markets have brushed off fears largely due to monetary stimulus and tech stocks remaining bullish. Real estate, though, is more firmly grounded in the fundamentals, so unemployment, rent and mortgage forbearance, and welfare support are things to watch. Since RE data is lagging, we won't see the results of the damage for a few more months. I expect the first leg will be an increase in price reductions and listings, followed by missed payments, then foreclosures. According to CNBC, 36% or rents and 30% of mortgages were late or missed in July. Renters are more likely to be working in industries hit the hardest.
I'm not investing in this market. In fact, I had been liquidating investments since I felt valuations reached their zenith a year or two back. Looks like that wasn't a bad call, but from the fixed income perspective, I think RE is still outperforming securities. That could all change, and I suspect the new $400 CARES Bill will, in part, determine the outcome.