What is your strategy right now?

Question

Hey Everyone,

With a supposed recession looming in the future.  What is your current strategy for the near future?  What are the veterans doing?  What are the newbies doing?  Please share as I’m a newbie as well and I’m trying to learn from the pros.  TIA!

Steve Vaughan · Answer

Hibernating like a bear in bad weather.  Selling off properties that bother me into the froth.  Maintaining relationships with specific old plex owners for when they're ready to sell.

I'd identify a specific neighborhood and get to know those owners.  Hyper-focus off-market deals . Good luck!

Brian Ellis · Answer

To buy value add properties, and be sure to secure reliable tenants.

I have high leverage, so during a recession I would actually benefit more from saving during that time and paying down high interest loans. When the market is on an upswing I can take advantage of the equity in the homes.

Might be the complete opposite from what others do or suggest. But the hot market has benefitted me greatly over the last few years because of the equity and appreciation.

Marcus Auerbach · Answer

Let's take a look at the facts.

Property values have gone UP during 4 of the 5 last recessions (data from KCM). The only recession property values did go down was the last one - which actually started out as a housing bubble and sub-prime mortgage crisis, which turned into a recession.

Landlords have done well during the housing crash, people always need a place to sleep, especially when they have lost their home to forclosure.

I am not doing the same I did the last years, find value add deals on MLS, buy in good school districts, rent best-in-class homes for top dollar. Leverage conservativley, manage portfolio risk and grow deep roots.

To a newbie I would say, don't wait to time the market. First, it may not go down at all or not much. Second if you don't have the guts to buy a property now, you will not do it when there are stormclouds on the horizon. Third, and maybe most important, what you learn now, is what will allow you to scale when opportunities present themselves.

Sean Doherty · Answer

Im also new but i can suggest Episode 311 with J Scott. He has some good tips on what to do when preparing for a recession. I'll have to relisten to get all of his tips but some that I remember are securing low interest access to money so you have the capital to invest when prices are lower, keep flip projects on the shorter simpler side to decrease the amount of time you may be exposed to a recession, and be more conservative in your numbers.

Frank Wong · Answer

Hi Victor,

The same strategy that I always use. Find value add SFRs in solid areas that I can rehab and rent out at market rate.  I am still looking and still buying my niche.  I am also stacking cash and building my just in case fund.  I see lots of mistakes and at some point, the market will expose people.  Hard to say what a recession would do with housing that's always tough to gauge.

If you have a system and you buy correct you can survive a recession. It will be interesting to see how things play out. Who will get killed, who will bleed, who will be opportunistic, and who will do nothing?  Just remember you don't need to predict the future to make money.

Dutch Langley · Answer

@Victor Lau  Market changes happen.  It can benefit us either way.  For us, being smart on how we buy and looking at ARVs of around 400k or less so we won't be on the market too long. (for flips) If a recession happens, perhaps we will be able to pick up some properties cheaper and then perhaps labor will be a bit cheaper.  Then maybe we do some buy and holds.  Not real concerned.  Keep enough cash to protect yourself.

Victor Lau · Answer

Title meant to say "what is your strategy right now?"  *facepalm*  Any moderators can help a newb out and make the correction.  @Mindy Jensen ? Thanks!

Victor Lau · Answer

Listened to that episode not too long ago too and that's what got me thinking about this.  I'll probably have to listen to it again.  Gotta love podcasts!

Alexander Felice · Answer

cash is the ultimate risk-mitigation. I'm stacking capital to weather any storms

I'm still buying properties, good deals at low interest rates are the name of the game in any market.

I'm working on non-cash intensive efforts like marketing and branding

lastly, I'm selling off any under-producing assets I own

none of this is recession indicator driven behavior as it's all pretty standard but my motivation is a bit higher based on how the market looks (crunched!)

Michael Ealy · Answer

There are opportunities regardless of the market cycle. A smart man once told me that it is always good to buy and sell real estate regardless of the market but how you buy and sell will depend on the market.

I am buying properties with good stable cashflow now and when the recession hits (and more people can't afford houses and need to move to apartments), occupancy will actually go higher and it's actually better for me. I am focused on 50+ unit apartment buildings and hotels. Like this one:

https://www.biggerpockets.com/forums/517/topics/707238-11-preferred-return-30-ownership-in-a-hotel-in-wisconsin

I've been investing since 1999 and I've done really, really well in 2008-2010 (during the recession). Right now, I am also building up a HUGE cash reserve and a just got a $5 MILLION line of credit to help me buy even more apartments to add to the 1,000 apartment units I've acquired. The cash and LOC will continue to become handy once the recession hits so I can buy even more.

What is your strategy right now?

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