What happens to you if (when) the market crashes?
San Antonio, TX · Member since 2016 · 91 posts · 23 votes
What happens to you if (when) the market crashes?
Most Popular Reply
Investor · Austin, TX · Member since 2013 · 680 posts · 1k+ votes
8yInvestors need to be smart, especially in this environment. The real estate market is closer to the top than the bottom, yes, so expect tough times ahead. Don't want to be a gloom and doomer and I am not for the type of investing I do. I know military, VA loans, and real estate investing (duplexes are my speciality).
Although I have been eligible to use a VA loan over the last 45 years I have never used it. Especially as an investor trying to house hack while on active duty carries a lot of risk. Plan on moving every three years. That alone causes increase risk. VA loans allow you to get into a property with NO SKIN IN THE GAME. Some see that as a benefit, I see it as a disadvantage. Most VA loans are used by people with little to NO reserves and that is dangerous!! Before 2008 you could by an investment real estate with as little as 3% down. Not now, for a good reason. I have always put down 20% or more even before 2008. Makes the number work great if your a buy and hold looking for CASH FLOW.
Bottom line, put 20% down and buy with no less than the 1% rule. The more doors the property has the easier to get 1%, in fact you should do better than 1%. So looking at this 4 plex example. Paying 500k you need to get $1250 rent from each unit just to consider the deal. If not there are better places to invest.
Rules for success in Multi-Family. Invest with the following:
1. Population Increasing. Not by Oil Boom or possibly temporary reason. Here in Texas, Population is Booming along the I35 corridor from San Antonio to Dallas. Opportunities abound!!!! Careful out in the sticks where oil drilling is going on, it can be boom or bust and turn on a dime.
2. Buy Multi-Family! I like, no; I LOVE DUPLEXES!! Use the 1% rule or better as a guide! Within this parameter, starting with rents below $1200 a month will keep you from major risk of a down turn. We have all heard of people buying real estate and due to job loss, or recession they lost the house to foreclosure or severe loss. That can and does happen! But my friends when was the last time you EVER heard of this.......I was renting an apt for the last 3 years at $1000/month and went to the leasing office to renew my lease and they told me it was my lucky day my lease was going to drop in half to $500 per month due to low vacancies caused by the recession. Yeah that is Right, it never happens in an area where population is increasing (Think South, not Detroit). Don't get me wrong, if your renting a SFH for $5000 a month those rents are at extreme risk during a downturn. But if your rent is $1200 or below your rent will be rock steady or go up in a downturn.....WHY? Because people renting from you have jobs that are not lost in a downturn. Think Mac Donalds worker. How many of those people lost jobs in the recession. People who lost jobs, lost homes and/or were paying too much rent and now they are downsizing into your duplex to save money. Your demand actually increases!!!! Crazy.
3. Buy SINGLE STORY properties. Your future renters are going to be BABY BOOMERS retiring with no money. They can't buy and must rent, but their hips and knees won't allow them to climb stairs! You will have little wear and tear on your properties, they will be living on Social Security and your rent will be the first thing they pay you!!
4. Have a 12 year plan. Buy with 20% down, save 1st year profits as maintenance reserve, take profits year 2-12 and pay off note and you will own free and clear. After down payment and initial rehab, you spend none of your own money, use tenants and the property is yours free and clear 12 years or less. Essentially, your paying 20 cents on the dollar for property that is most likely going to be worth 50% or more than you bought 12 years earlier with unbelievable cash flow.
5. Those who make it a habit of investing no money down will most likely hate real estate as an investment years down the line. Good Luck! BTW, I welcome a downturn, I am not selling now, every property I have ever bought as an investment I still own. The downturn only helps me buy more!!
26 Replies
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8yYou have a giant mortgage payment on your 500k rental. The tenants stop paying you can’t support it and you get foreclosed on
- All Over, USA · Member since 2017 · 689 posts · 756 votes8y
^ What he said. Pretty simple concept.
Tenants can’t make rent, and/or you can’t make your mortgage payments.
Bank takes it all.
- Rental Property Investor · Santa Clarita · Member since 2018 · 22 posts · 17 votes8yBig part was rates also going up on the ballon payments
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes8y
What would I do of the market crashed? I don't have much debt, so, I'd probably wake up from my nap... and go shopping!
Isn't there better value for a KC quad than $500k? You're in one of the most affordable markets around still, aren't you?
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes8y
@Account Closed, sure, zero down sounds great, but, what are the other numbers? Realistic rent per month (for 3 doors only)? Interest Rate? Terms (eg. balloon after how many years)?
Comparable sold comps for existing fourplexes? [Over-capitalizing is your enemy!]
Who and why is someone "potentially" letting you in with no skin in the game?
If it sounds too good to be true...
- San Antonio, TX · Member since 2016 · 91 posts · 23 votes8yThe rents would be about 1% once I moved out. That’s what most of the fourplexes in the area are selling for (1% PTR). The mortgage is about 3k PITI, the interest rate is about 4.5% and I’m not sure about a ballon on the seller financing side, but the va would be a 30 year loan. Conservatively it should make about $1600 above the mortgage fully occupied and $800 cash flow after property management, Capx, vacancy and maintenance.
- Property Manager · Minneapolis, MN · Member since 2014 · 380 posts · 167 votes8y
I have been in the industry since 1998 and have been through a few corrections. Here is what I have seen and my plan:
A. Tighten operations and make sure your customer service is above the competition. Anyone can do alright in our market currently in MN. When we have the next correction you will see a lot of buildings going back to the bank and forced exits from owners/management companies that do not know how to operate in a slow market.
B. BUY BUY BUY - Right now we are paying 60% more than I have seen buildings trade for just 5 years ago. They still make sense at the moment since rents are projecting up. I am starting to see a ceiling in the C class value add already, but don't think the market is done....when it is if you can hang in there....you will find some great bargains. Even in this market we found a REO!
I am not predicting anything....but as someone who is very active in the market know of over 4000 units for sale right now in the MF industry....brokers have told me they expect the same for 2019. To me this is a signal we are nearing the top and owners are getting out before 1. Interest rates climb (depressing price), 2. Market starts to swing downwards (lowering price) 3. Vacancies/rents start to reach normal levels...making the industry less interesting for outside buyers.
What a lot of owners I work with now are doing is building up cash reserves to no less than 100K per community (average size 5 Million value). You need to weather the storm to stay in the game!
- 8yShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
Looking back at the last market crash there were several factors that contributed to it but the big ones included people were not being qualified for loans based on the reality of what they could realistically afford to pay back. Thus many people were prequalified to buy homes at a higher price than they could realistically afford. This then pushed up housing prices. Buyers then bought at the edge of their income and when rates adjusted higher the mortgage became more then they could bear. So many people stopped paying on their mortgages. Then, over a few year period, people started getting foreclosed on and the market became saturated with homes (the supply went way up to more than exceed demand) therefore the prices came crashing down.
Investors who were hurt the most were speculative investors or those who were building during the crash. Most rents find not go down that much. So if investors were buy and hold investors that were cash flowing, then they were in a better position than other types of investors. Sure there were layoffs and unemployment went up, but as long as they had enough cash flow from their properties they were able to weather the storm and put other tenants in their properties. In my neighborhood in Arizona where it was hit really hard more than half of the neighborhood turned over in a 4 year period. I would say it was closer to 75%. But most of the people who were being foreclosed on were home owners not investors.
So to protect yourself, make sure that you can cover payments when vacancy goes up and make sure you are cash flowing enough to cover expenses still if the rental prices dip a little and save some of the cash flow for an emergency fund - maybe 5k per unit.
- Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes8y
I'm honestly not sure how the market is going to crash in my area, when we have around 800 new people every day moving into the area, and all of them need someplace to live, and new construction isn't keeping up. And even in the last big correction, a "crash" was more like a 5% to 20% drop in value, depending on your area. It's not like stocks, where an Enron can go to zero.
But if/when we have a correction, I'll probably use it as an opportunity to buy more properties. Any smart investor keeps good cash reserves.
You, on the other hand, are going to be overextended on this deal. I don't know your market, but I don't think I'd do a deal like that unless I had a great day job that ensured me that I could pay the mortgage on this property no matter what. I'm also concerned about jumping from owning 1 SFR to doing a 4plex new build. I'm a GC, and while $500K sounds high to me (maybe you're building a luxury property, which would be more exposed to a correction), I know that no matter what a project is budgeted at, you're likely to go over. I'd be very cautious in this deal.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Dennis M.:
500k geez! I could buy a fully occupied quad in my area that makes 2,000 month cashflow for under a 100k today .
we have to take into account this is NEW construction.. not old construction that is selling for 25 to 30% of replacement value apples and oranges.
some markets like texas you can still build pretty cheap in the 60 to 70 bucks a foot range maybe for rental grade.
we are hitting 100 to 110 in pdx and 120 to 130 a foot in for really nice in Charleston.
so if this quad is about 4k sq ft with 4 kitchens 8 baths I can see just build cost being close to 400k for something new..
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes8y
Continue to collect rent. Buy properties and in locations where the risk of not being able to pay the mortgage for extended periods is zero regardless of market conditions.
Stress test your deal analysis for worst case scenarios.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Shiloh Lundahl:
Looking back at the last market crash there were several factors that contributed to it but the big ones included people were not being qualified for loans based on the reality of what they could realistically afford to pay back. Thus many people were prequalified to buy homes at a higher price than they could realistically afford. This then pushed up housing prices. Buyers then bought at the edge of their income and when rates adjusted higher the mortgage became more then they could bear. So many people stopped paying on their mortgages. Then, over a few year period, people started getting foreclosed on and the market became saturated with homes (the supply went way up to more than exceed demand) therefore the prices came crashing down.
Investors who were hurt the most were speculative investors or those who were building during the crash. Most rents find not go down that much. So if investors were buy and hold investors that were cash flowing, then they were in a better position than other types of investors. Sure there were layoffs and unemployment went up, but as long as they had enough cash flow from their properties they were able to weather the storm and put other tenants in their properties. In my neighborhood in Arizona where it was hit really hard more than half of the neighborhood turned over in a 4 year period. I would say it was closer to 75%. But most of the people who were being foreclosed on were home owners not investors.
So to protect yourself, make sure that you can cover payments when vacancy goes up and make sure you are cash flowing enough to cover expenses still if the rental prices dip a little and save some of the cash flow for an emergency fund - maybe 5k per unit.
Credit FROZE you could not get an investor loan from 08 to 2011... period.. unless you were a 1% er.. new construction stopped.. all those sub contractors were out of jobs.. they left that's why in areas of huge construction ( minus Texas) market crashed.. AZ NV FLA GA Central CA those were hardest hit as new construction was a huge part of what was going on.. new construction has been tame in most other parts of the country compared.. so you have credit freeze and tenants leave the state.. you have vacant rentals.. I had clients in PHX that lost 4 plexs left and right as they had zero occupancy for year or more. Not predicting this going forward.. One reason is the banks are not giving the massive amount of spec construction loans again.. I know I am throttled to 12 at anyone time.. pre 08 I could have had 50 to 100 if I wanted... and I would have not survived like most builders that I know..
So over leverage which most investor do.. and stop in construction and for a time there cash only to buy real estate for investor purposes guess what happens prices crash.. I like to say what would happen to the auto industry if you could not finance that 60k SUV and it had to be bought for in cash ???? or private aviation.. were you can buy 500 to 10 million dollar planes with 5% down and get section 179 that industry would crash.. just like RVs and all other manner of things we really don't need :) Credit that's what runs this stuff..
- 8yShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
@Jay Hinrichs makes some really good points. And his comments come from experience being in the thick of everything during the market crash. When credit freezes and people can’t get loans, it is very difficult to purchase anything unless you have large coffers of cash. Again, going back to basic economics, it’s the ability to purchase is low, making demand low, then prices fall.
Jay, just out of curiosity, what would you consider a prudent amount of leverage to be?
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
One could talk to a commercial banker.. they will have guidelines for commercial loans IE liquidity and net worth criteria . I know I have to give my quarterlies and yearly's and I have to maintain net worth.. drop below and cash has to be added.
With your average BP buy and holder they are getting their first 10 loans and these don't have net worth provisions so the banks are allowing them max leverage with no real over sight other than front end underwriting.
I think some of the portfolio lenders on the bigger stuff I hear about they have annual reporting requirements.
@Steve Vaughan Steve and I have talked about this and I am thinking that is why Steve has paid off some of those loans with those requirements and from what I hear Steve talking about as his portfolio Matures he has been paying off debt and is not continuing to roll up max debt .. But if he wants he can speak to this..
I just look at some of the most successful folks I know and they have a lot of real estate paid for.. bottom line.
my self personally I have paid off or sold all my long term contingent liabilities including my residences although I still have a little to go on my Oregon home but I have no more than 20% LTV on it.. but again I am at the end of the road not the beginning like so many on BP.. :) and many of my friends or Colleagues same thing they sold business s or inherited HUGE chunks so what works for them and what works on BP is not really germane.. ..
Although I do wonder some times say you getting 200 a month cash flow for every 100k in debt.. Just to make the math easy.. and you want 20k a month in cash flow ( reasonable number the 10k a month is old news no one can really live on 10k a month these days) at least on most of the coasts.. So the goal is 100 units so 10 million in debt.. ??
that's a daunting number for only 20k a month.. for me personally we can make that with no debt just being brokers.. :) and no risk.. but if the market is nice and those 100k props go up that's something nice.. but if they don't .. and they just trundled along.. Not sure for me personally I would do that.. I can think of a lot of other business's that would be more fruitful with that amount of debt.
- San Antonio, TX · Member since 2016 · 91 posts · 23 votes8yAll very great points. I’m active duty AF. I signed a 10 year commitment so I’m probably not going to be fired if the market crashes. But I’m trying to navigate the numbers and trying to scale responsibly. I’m nervous about the debt but i feel like I’ll be nervous regardless. So many of the books and podcasts say to get outside your comfort zone. I’m making about 5.5k a month. So the DTI is still kinda high, but I realize it’s also an investment. I’m trying to balance the risk and the reward but it seems like everyone has a different scale.
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8yGrayson Gist at that income I wouldn’t buy a 500k quad. Look in other areas or cheaper properties.
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes8y
Originally posted by @Account Closed:
The rents would be about 1% once I moved out. That’s what most of the fourplexes in the area are selling for (1% PTR).
The mortgage is about 3k PITI, the interest rate is about 4.5% and I'm not sure about a ballon on the seller financing side, but the va would be a 30 year loan. Conservatively it should make about $1600 above the mortgage fully occupied and $800 cash flow after property management, Capx, vacancy and maintenance.
I should have guessed that it was VA that would be subsidising your investing ambitions. A mortgage calculator tells me that borrowing $500k over 30 years at 4.5% interest would cost $3,629/m PITI (including $429 PMI). Does VA get you out of paying PMI? Even if so, that's still an extra $200/m than your "about $3k" would suggest.
Even worse, if your "about 4.5%" interest rate proves to be not conservative enough.
Extrapolating your idea, if you did this every time you moved, you'd always still be looking at negative cash flow while they were being built, and likely while you were living there.
I worry that somewhere along the way, you'll be taken advantage of by your building contractor/s, who might start seeing you as an endless source of guaranteed dollars.
People tend to not be as careful with their money as they should be, if too readily available.
Does that include you? Thank you for your service. All the best...
- Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes8yI hope it crashes soon...I am ready to buy killer houses again for $15k...
- Rental Property Investor · Lehi, UT (Lehi) · Member since 2018 · 91 posts · 99 votes8y500,000 seems like a lot for a quad. I’m getting ready now to buy a six plex plus a 3 bedroom 2 bath house. Gross income would be 5,200. I’d try to find a better deal if I was you.
- Rental Property Investor · Chandler AZ and Sylvania, OH · Member since 2009 · 708 posts · 561 votes8y
Thanks @Shiloh Lundahl for posting on interesting threads so it pops up on my keyword alert.
When the market corrects, like a lot of prudent investors, I will likely grow my portfolio. The last few years have not be rewarding for buying off the MLS in Phoenix. I'm repositioning my portfolio into better return on equity properties in the midwest, so taking some of the appreciation and spending it.
As for the last crash, I wasn't in the market heavily but had a few properties. I was underwater on them for awhile but made the payments and survived. They have been my worst performing properties 10 years running, I sold 1 and thinking about selling the other. I think everyone in 2005 had the fear of missing out syndrome, so they all bought (myself included). The shear volume of people doing it and failing is what ultimately caused the collapse in my local market. Investors are still a small percentage of total transactions. I still remember people camping out at builder's site for a chance to be in a lottery to buy a new house, crazy times.
As for your case, 500K for a quad is like Phoenix prices, doesn't seem like midwest prices to me. The fact that you will be 100% leveraged should be concerning because if anything happens you will immediately be under water. That would make me nervous. I think you are already suspecting a correction is coming, so why put yourself in a position to immediately be underwater. If you were in it with some skin, then you may be able to weather the storm better. Just more exit strategies.
- 8yKerry BairdPro MemberRental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
To those who think that dropping rents will still leave them with positive cash flow, there can be another way the cookie crumbles:
Before the last boom and bust cycle, I used to hear landlords saying they weren't worried; they'd reduce their rents in a downturn. My partner and I bought in what we thought was a lateral market, in Texas.
However, the drillers hit oil nearby. Our properties were full and rents were high, but as folks cycled in and out of the community, we had more oil patch workers than before. And when the boom went bust in a very localized manner, our tenants lost jobs. They couldn't get hired again. The tenants could not pay a reduced rent and many landlords went to foreclosure. Dropping rents wasn't going to help.
- Investor · Austin, TX · Member since 2013 · 680 posts · 1k+ votes8y
Investors need to be smart, especially in this environment. The real estate market is closer to the top than the bottom, yes, so expect tough times ahead. Don't want to be a gloom and doomer and I am not for the type of investing I do. I know military, VA loans, and real estate investing (duplexes are my speciality).
Although I have been eligible to use a VA loan over the last 45 years I have never used it. Especially as an investor trying to house hack while on active duty carries a lot of risk. Plan on moving every three years. That alone causes increase risk. VA loans allow you to get into a property with NO SKIN IN THE GAME. Some see that as a benefit, I see it as a disadvantage. Most VA loans are used by people with little to NO reserves and that is dangerous!! Before 2008 you could by an investment real estate with as little as 3% down. Not now, for a good reason. I have always put down 20% or more even before 2008. Makes the number work great if your a buy and hold looking for CASH FLOW.
Bottom line, put 20% down and buy with no less than the 1% rule. The more doors the property has the easier to get 1%, in fact you should do better than 1%. So looking at this 4 plex example. Paying 500k you need to get $1250 rent from each unit just to consider the deal. If not there are better places to invest.
Rules for success in Multi-Family. Invest with the following:
1. Population Increasing. Not by Oil Boom or possibly temporary reason. Here in Texas, Population is Booming along the I35 corridor from San Antonio to Dallas. Opportunities abound!!!! Careful out in the sticks where oil drilling is going on, it can be boom or bust and turn on a dime.
2. Buy Multi-Family! I like, no; I LOVE DUPLEXES!! Use the 1% rule or better as a guide! Within this parameter, starting with rents below $1200 a month will keep you from major risk of a down turn. We have all heard of people buying real estate and due to job loss, or recession they lost the house to foreclosure or severe loss. That can and does happen! But my friends when was the last time you EVER heard of this.......I was renting an apt for the last 3 years at $1000/month and went to the leasing office to renew my lease and they told me it was my lucky day my lease was going to drop in half to $500 per month due to low vacancies caused by the recession. Yeah that is Right, it never happens in an area where population is increasing (Think South, not Detroit). Don't get me wrong, if your renting a SFH for $5000 a month those rents are at extreme risk during a downturn. But if your rent is $1200 or below your rent will be rock steady or go up in a downturn.....WHY? Because people renting from you have jobs that are not lost in a downturn. Think Mac Donalds worker. How many of those people lost jobs in the recession. People who lost jobs, lost homes and/or were paying too much rent and now they are downsizing into your duplex to save money. Your demand actually increases!!!! Crazy.
3. Buy SINGLE STORY properties. Your future renters are going to be BABY BOOMERS retiring with no money. They can't buy and must rent, but their hips and knees won't allow them to climb stairs! You will have little wear and tear on your properties, they will be living on Social Security and your rent will be the first thing they pay you!!
4. Have a 12 year plan. Buy with 20% down, save 1st year profits as maintenance reserve, take profits year 2-12 and pay off note and you will own free and clear. After down payment and initial rehab, you spend none of your own money, use tenants and the property is yours free and clear 12 years or less. Essentially, your paying 20 cents on the dollar for property that is most likely going to be worth 50% or more than you bought 12 years earlier with unbelievable cash flow.
5. Those who make it a habit of investing no money down will most likely hate real estate as an investment years down the line. Good Luck! BTW, I welcome a downturn, I am not selling now, every property I have ever bought as an investment I still own. The downturn only helps me buy more!!
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Joe Scaparra:
Investors need to be smart, especially in this environment. The real estate market is closer to the top than the bottom, yes, so expect tough times ahead. Don't want to be a gloom and doomer and I am not for the type of investing I do. I know military, VA loans, and real estate investing (duplexes are my speciality).
Although I have been eligible to use a VA loan over the last 45 years I have never used it. Especially as an investor trying to house hack while on active duty carries a lot of risk. Plan on moving every three years. That alone causes increase risk. VA loans allow you to get into a property with NO SKIN IN THE GAME. Some see that as a benefit, I see it as a disadvantage. Most VA loans are used by people with little to NO reserves and that is dangerous!! Before 2008 you could by an investment real estate with as little as 3% down. Not now, for a good reason. I have always put down 20% or more even before 2008. Makes the number work great if your a buy and hold looking for CASH FLOW.
Bottom line, put 20% down and buy with no less than the 1% rule. The more doors the property has the easier to get 1%, in fact you should do better than 1%. So looking at this 4 plex example. Paying 500k you need to get $1250 rent from each unit just to consider the deal. If not there are better places to invest.
Rules for success in Multi-Family. Invest with the following:
1. Population Increasing. Not by Oil Boom or possibly temporary reason. Here in Texas, Population is Booming along the I35 corridor from San Antonio to Dallas. Opportunities abound!!!! Careful out in the sticks where oil drilling is going on, it can be boom or bust and turn on a dime.
2. Buy Multi-Family! I like, no; I LOVE DUPLEXES!! Use the 1% rule or better as a guide! Within this parameter, starting with rents below $1200 a month will keep you from major risk of a down turn. We have all heard of people buying real estate and due to job loss, or recession they lost the house to foreclosure or severe loss. That can and does happen! But my friends when was the last time you EVER heard of this.......I was renting an apt for the last 3 years at $1000/month and went to the leasing office to renew my lease and they told me it was my lucky day my lease was going to drop in half to $500 per month due to low vacancies caused by the recession. Yeah that is Right, it never happens in an area where population is increasing (Think South, not Detroit). Don't get me wrong, if your renting a SFH for $5000 a month those rents are at extreme risk during a downturn. But if your rent is $1200 or below your rent will be rock steady or go up in a downturn.....WHY? Because people renting from you have jobs that are not lost in a downturn. Think Mac Donalds worker. How many of those people lost jobs in the recession. People who lost jobs, lost homes and/or were paying too much rent and now they are downsizing into your duplex to save money. Your demand actually increases!!!! Crazy.
3. Buy SINGLE STORY properties. Your future renters are going to be BABY BOOMERS retiring with no money. They can't buy and must rent, but their hips and knees won't allow them to climb stairs! You will have little wear and tear on your properties, they will be living on Social Security and your rent will be the first thing they pay you!!
4. Have a 12 year plan. Buy with 20% down, save 1st year profits as maintenance reserve, take profits year 2-12 and pay off note and you will own free and clear. After down payment and initial rehab, you spend none of your own money, use tenants and the property is yours free and clear 12 years or less. Essentially, your paying 20 cents on the dollar for property that is most likely going to be worth 50% or more than you bought 12 years earlier with unbelievable cash flow.
5. Those who make it a habit of investing no money down will most likely hate real estate as an investment years down the line. Good Luck! BTW, I welcome a downturn, I am not selling now, every property I have ever bought as an investment I still own. The downturn only helps me buy more!!
Nice post and a very good recipe to follow.. my only slight variation is we build new home communities and we are one of the few that will deal with VA loans.. my wife and I believe we owe it to our service men and women to allow them to use those loans even though they are more time consuming for us.. but on the new construction the inspections are no more daunting on older homes it can be a challenge..
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