Are you prepping for the crash?

Investor · Kennesaw, GA · Member since 2018 · 98 posts · 127 votes

I'm curious what investors are or aren't doing in relation to the impending market crash a lot of people (smarter than me) are saying will happen in the next 2'ish years.

I'm selling a house in the next few months and contemplating just paying the capital gains instead of doing a 1031 exchange. Probably won't, but it's a thought I had.

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Russell BrazilBusiness Member

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

Much more money has been lost by investors preparing for market corrections than has actually been lost in market corrections.

[email protected]301-893-4635 Podcast Guest on Show #192

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Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y
@Michael H. I'm looking for great, cash flowing deals and see no signs of a crash in the years ahead. It may flatten a bit but good deals now will still, very likely, be good deals in a few years.
24 Reply
Vlad Denisov
Glendale, CA · Member since 2018 · 60 posts · 13 votes
8y
What are the indicators of upcoming crash though?
2 Reply
Michael H.
OP
Investor · Kennesaw, GA · Member since 2018 · 98 posts · 127 votes
8y
@Max Petrov here is one article discussing it. http://time.com/money/5235032/just-around-the-bend-this-is-when-the-stock-market-will-crash-according-to-5-famous-investors/ I tend to go with the experts on this because I’m not one. I’m just starting out as a real estate investor.
8 Reply
Michael H.
OP
Investor · Kennesaw, GA · Member since 2018 · 98 posts · 127 votes
8y
@Jason DiClemente a lot of people would disagree with you. Are you sure you don’t have any bias at work? Rose colored glasses?
5 Reply
Account Closed
Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
8y
Originally posted by @Michael H.:
@Max Petrov here is one article discussing it.
http://time.com/money/5235032/just-around-the-bend...
I tend to go with the experts on this because I’m not one. I’m just starting out as a real estate investor.
The Stock market is not the the Real Estate market. Apples are not Oranges.
The Stock Market will correct, I agree with that. However, the real estate markets I expect to correct in are the big cities on the west coast along with a few on the east coast. Everything else will be pretty stable. I'm adding to my inventory.
10 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Much more money has been lost by investors preparing for market corrections than has actually been lost in market corrections.
[email protected]301-893-4635 Podcast Guest on Show #192
District Invest Group545 Reviews
Website View Page
112 Reply
Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
8y
A crash is a very specific and dangerous word. I think of 07-09 markets. This market looks nothing like that. Both markets driven by completely different factors. It's possible the market can crash, sure I am open to all possibilities. I won't be selling everything preparing for an unknown. I will, however, be looking for deals should prices come down and I see opportunity.
Now I think if you are over leverage, this is a great time to scale back. Sell the worst deals you have and keep the best. Remember cash is a position.
31 Reply
Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
8y
I have taken a profit on the properties in California, but not selling the stuff I own in western wa. Still buying if something good comes along. Is there a crash coming? Inevitably, probably, eventually.
5 Reply
Account Closed
Member since 2018 · 214 posts · 175 votes
8y
I have cash reserve and do not plan to sell anything during the next downturn. Instead, I will hold my portfolio for another 20 to 30 years more, not much need to be prepared.
13 Reply
Matthew McNeil
Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
8y
Originally posted by @Michael H.:

I'm selling a house in the next few months and contemplating just paying the capital gains instead of doing a 1031 exchange. Probably won't, but it's a thought I had.
Just curious; what's your reasoning for paying the taxes verses an exchange. I've thought about this and the numbers didn't work for me. What's your end game regarding the asset to consider this?
6 Reply
Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y
@Michael H. A lot of people do disagree with me, but a lot of those people have been predicting this crash for 5 years. Even a broken clock is correct twice a day.... Nothing I've seen, in my area, indicates any sort of crash is coming.
12 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y
I am pivoting with the market and re-allocating capital from value plays to more cash flow plays because the value plays are not penciling out as well. I can't predict market cycles...I'm just following my criteria (and have purchased a lot in the past couple of years with no concern if the market corrects).
7 Reply
Michael H.
Rock Hill, SC · Member since 2015 · 104 posts · 209 votes
8y
The only ones who get hurt on a roller coaster are the ones who jump out.
55 Reply
Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
8y
I just posted an article on my company's FB page detailing the impending crash in my specific market. It was two years old.
Buy great, cash flowing deals and sleeping well, that's what I'm doing.
12 Reply
Ron Gallagher
Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
8y
I wish this crash everyone is predicting would hurry up and happen so I can buy more properties at a lower price.
41 Reply
Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
@ Michael h
Actually the long term capital gain tax has reduced a great deal this year. 20% from 25%. Even a llc will reduce the tax at 15% rate. The difference is still minute. I have seen two homes sold recently where sellers pay tax holding at closing and do not want to bother with another investment properties. Here the capital gain is often way over 6 figures.
Here even in SFO we are seeing signs of inventory built up. CA often starts trends for the rest of the country. Very few home sellers feel the home prices can go up further and they are all unloading. Those who leverage a lot will feel the pain especially they are unable to pay from job loss or housing has lots vacancies. The flipper will find the higher HM lender interest and longer marketing time making a profit.
Here in US the trade imbalance effort appears to be a short one. Listening to foreign leaders and economists suggest it is a long way from getting resolved. The trade war with Japan took about 3 years. They have no natural resources and all import and export from US. In the end they moved Sony to Mexico and Toyota and Honda to US. China has the resources and can survive with 1 less partner. The one that has an immediate impact is appliances, countertop, imported items. All stores are planning to rise price quickly. The home remodeling effort will cost a lot more. So will be the new homes. If the gas price and interest rise (starting in less than 24 hours) happen together, high interest rate will make homes unaffordable to some.
The key indicators are unemployment rate, interest rate, income rise, and fiscal policy. If one has a system put in place as listed above by others then he can coup with unknowns.
12 Reply
Michael H.
OP
Investor · Kennesaw, GA · Member since 2018 · 98 posts · 127 votes
8y
@Matthew McNeil my thought was it could be better to pay the 25k in taxes if house prices dropped significantly. I’m not going to chance it though.
0 Reply
Sherwin Gonzales
Rental Property Investor · San Francisco, CA · Member since 2015 · 236 posts · 156 votes
8y
@Michael H. great question! You know how I'm preparing for a crash? By continuing to buy more cash flowing assets! The same people predicting a crash, are usually the same people that have been predicting a crash every year for the past few years. If it happens, it happens. But if not, would I regret leaving deals on the table because I was prepping for a crash? I think people need to change their mindset or at least keep an open mind and not only think that selling all your assets and having cash on hand is prepping for a crash. For me, if I find a deal, I'm buying. At the same time, I'm building my track record, my team, and relationships. So if or when a crash happens, my team is prepared to take action to get more assets! Who'd you rather work with on a deal? Someone who has been continually taking action and have a proven track record to close on deals or someone who has been sitting idle and no team in place?
20 Reply
Bob Okenwa
Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
8y
You see these posts every few days/weeks. People need to understand the difference between a stock market crash, a recession, and a bear market.
What happened 10 years ago is essentially a once-in-a-lifetime event. Last time something like 2007-2008 happened was 1929. A full on market crash tend to be once-in-a-generation (roughly every 20 years) event. Bubbles, recessions, and bear markets happen a little more frequently (about once a decade) and typically last only for about a year.
Buy smart, don't over-leverage, and keep something set aside for a pullback and be prepared to buy more once things take a turn for the worse, as they eventually will. When this will happen, no one knows exactly. Even the "experts" have been calling for calamity for years now and we're still not there yet. The warning signs are showing themselves, so just act accordingly, but not necessarily out of fear. Scared men don't win.
As Warren Buffet says, "Be fearful when others are greedy, and be greedy when others are fearful."
32 Reply
Jonathan PfluegerPro Member
Ben Lomond, CA · Member since 2016 · 338 posts · 337 votes
8y
In any market, during any cycle, a deal is a deal is a deal. Buy good deals, make your money going in, stick to your criteria, and when you buy will not make a difference. You can't predict the future but you can analyze for a good deal.
13 Reply
Robert Steele
Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
8y
Originally posted by @Michael H.:
@Matthew McNeil my thought was it could be better to pay the 25k in taxes if house prices dropped significantly. I’m not going to chance it though.
Just a small thing to keep in mind. If you don't do a 1031 you are getting all that mortgage principle pay down that you already paid tax on each year, tax free. Sometimes this is nothing, sometimes it can be a lot, depending on how long you held the mortgage and the term of course.
Personally, I've never done a 1031. I always pay the tax and take the cash. If I'm selling I'm usually not in the market to be buying.
1 Reply
Anthony R.
Property Manager · Lakewood, OH · Member since 2015 · 250 posts · 258 votes
8y
Okay two things, first I agree that there's something coming but I hesitate to use the word "Crash". Market corrections happen all the time. With interest rates rising, prices at a high and stock very low, I think it's very likely we'll see a pull back in home price values, also known as a "Market Correction".
The second thing is, I don't care if a rental is worth 80k or 400k, I buy to hold and my deal making algorithm doesn't change.
That is, if I buy property X at price Y does the monthly gross Z minus the monthly operating expenses Q leave me with enough to want to do the deal, usually about (150-300 a door in my area).
If the answer is no, then I take my money and stick it in a nice warm safe spot until the answer becomes yes. Then I add to my portfolio. If you stick to this business model then it doesn't matter how the market is moving. You get cash flowing units and you can watch the world burn down around you.
Between you and I, I want it to burn, better deals
5 Reply
Scott Morongell
Investor · Charlotte, NC · Member since 2017 · 791 posts · 479 votes
8y
@Michael H. We have switched up how long we underwrite our deals for. On top of that, we also place longer term debt on the deals incase something chances. That being said, theres always good cash flowing deals out there and if I were you I would still 1031 exchange granted the deal adds up.
3 Reply
Jake Robers
Milwaukee, WI · Member since 2016 · 9 posts · 4 votes
8y
If you focus on buying good deals with good strategy (like the burrr), you can get a return on your capital in a very short time. I would count on something like this instead of gambling on a possible market correction.
In the case that the market corrects, perfect! You can continue to scoop up deals like before.
1 Reply
Todd Fithian
Investor · Riverside, CA · Member since 2014 · 239 posts · 177 votes
8y
@Michael H. Good stuff man. I’ve got to use this one.
1 Reply

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