Buy Now or Wait for the much talked about recession?

44 Replies

Good Day Bigger Pockets Fam, 

I'm 24 years old. I currently own 1 property (that I live in) in Virginia Beach, Virginia. I;m new to Bigger Pockets and I'm new to real estate in general. I want to invest in rental properties that cash flow in this area. I've been doing a lot of research over the past couple months about real estate and more specifically rentals. With all this talk about the market being out of control with high prices and the upcoming recession, do you feel its best for me (as a "newbie") to wait until then? Should I just keep growing my knowledge and saving so that I can buy more when/if the recession hits?

P.S: If you're in the Virginia Beach area or anywhere in the 757, send me a message I'd love to connect with you!

Thank You

Nationally prices have retreted twice since the great depression. 1991 prices dropped about $1500 then the housing collapse from a decade ago. The other 10 recessions in that time period, housing prices continued to rise. 

Could prices come down? Sure. Could they continue to rise? More than likely. 

More importantly is how your local market operates. 

@Shaquan Webster

If you have the knowledge,and ready. Just go ahead and buy something. I've been hearing talk about a recession for the last 2 yrs. It hasn't stopped me.

What if it doesnt hit for a few more yrs, and you just sat around and waited the whole time?

I know its probably going to come soon, but if I was you I'd just get out there and buy something. There are plenty of good deals to be had. You just have to look for them.

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@Bryan Richardson I get what you're saying, but I just want to make sure that I invest my money the best way/time that I can, especially if I'm just using my saved up money without a partner. But yea, I totally understand where you're coming from. You're right also. 

I was told not to buy anything in 2016 because the impending recession was going to crush my dreams

Since then I've bought 32 doors that cash flow 

If you learn from propagandists you'll always be making decisions on false narrative and little context. 

No one knows when the next recession will come.  We have been discussing this topic since 2014...tens of thousands of posts asking this same question.

@Shaquan Webster I agree with what many have already said. I’ve bought 4 properties in the last 2 years. I spent a lot of time finding and negotiating them because they’re not easy to find right now. I had to walk away from most of them but that’s normal - it’s a numbers game. But deals are out there and those sitting on the sidelines worrying about a recession are missing out.

Originally posted by @Shaquan Webster :

@Alexander Felice so what's your take on this upcoming recession? Do you think it'll happen?

I don't predict specific future events, doing so would make me a propagandist. 

Our economic system is complex, my suggestion is to learn as much about it from primary sources and listen to people on the internet as little as possible. You're asking people who DON'T and CAN'T know what is going to happen and then you're going to make decisions around those (potentially inept) opinions. This will not serve you well. 

Read a book called "Fooled by Randomness"

Originally posted by @Alexander Felice :
Originally posted by @Shaquan Webster:

@Alexander Felice so what's your take on this upcoming recession? Do you think it'll happen?

I don't predict specific future events, doing so would make me a propagandist. 

Our economic system is complex, my suggestion is to learn as much about it from primary sources and listen to people on the internet as little as possible. You're asking people who DON'T and CAN'T know what is going to happen and then you're going to make decisions around those (potentially inept) opinions. This will not serve you well. 

Read a book called "Fooled by Randomness"

 That is Talebs best book. Written before he became the household name he now is and before his ego got in the way. 

Waiting for a recession is much harder than it sounds in theory. Consider these points.


1. Not all recessions were (or will necessarily be like) the last. With respect to property values, that was an event unparalleled in magnitude since the great depression. 

2. The previous RE crash was not just driven by the condition of the economy- there were highly systematic flaws in bank financing procedures that lead foreclosure (and therefore excessive supply) in a manner that a normal economic crisis would not likely cause to the same degree. Lending has since made significant changes to the qualification process and has generally stuck with this process. Mortgage insurance is now a thing as well, and homeowners are required to have this service for low equity loans. 

3. Markets don't go top to bottom overnight. Even in the last crash, which was extreme, it took two years to bottom out. A crash of lesser magnitude may feel like even more of a slow roll. That being considered- are you losing more money by paying more for a property today? Or by foregoing the returns you could be earning for another 2-4 years while you lie in wait?

Final thought: I think any serious investor plays all four quarters, but with a fluid strategy. The type of deal you do, market you choose, and/or asset you invest in may change through the phases of a market cycle. Mine certainly have. There's money to be made in all seasons though.

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@Shaquan Webster if you use the BP search function you can find the many threads on this website that ask this very same (and extremely boring question).

If you then read those threads you’ll be enlightened with all the knowledge of those threads.

If the BP search function doesn’t give you the answers you seek, you can try Google and type in “BiggerPockets recession” and you’ll have all the threads you need.

If you don’t want to do that, no worries. I have done it for you:

https://www.google.com/search?q=biggerpockets+recession&ie=UTF-8&oe=UTF-8&hl=en-us&client=safari

These "recession" topics are kind of amazing at this point.  Setting aside the unpredictability of the timing of a recession or its effect on the economy and/or the real estate market, every single poster who inquires about "waiting for the next recession" presupposes they are actually going to have the nerve to buck societal trends and dire economic warnings, zig when the entire market zags, and buy properties when the market tanks.  Property prices went down a lot in the last recession because everyone was convinced the entire economy was doomed and it was a very scary time to buy.  That is, very few people were buying, those that did took risk, and they were rewarded as a result.  This 20/20 hindsight nonsense ("It was so obvious that real estate was a good deal back and next time I"ll get in on the party") is delusional.  With so many people "waiting" for the next recession, I don't see how prices will go down and, if they do, it will like because it's some new scenario that has everyone terrified about real estate (including, most likely, new investors) meaning that, once again, it would be a very small number of people buying.  Just my two cents on all this recurring "waiting for recession" question.

@Shaquan Webster I agree with most of other replies but depending on what type of investing you plan on doing, make sure you underwrite your deals and run scenarios for bad situations. If you are buying and holding maybe you see how the property will perform if rents drop 10-20% or vacancy goes up to 15-20%. You'll want to know if you can still cashflow even with those factors so you wont have to lose the property. If you are going the flipping route then maybe you could lower the projected ARV or selling price in case of a dip to see if you will still profit off the deal. It is always better to build a cushion in and be a little extra conservative with your numbers.

Generally the sooner you start the better.  So once you feel comfortable with your knowledge base and investing your money, dive in.  A common theme on Rod Khleifs podcast is investors saying they wished they would have started sooner.

Hope this helps!

John 

@Shaquan Webster market does not matter.  Investors aren’t buying things for market price.  Find sellers in distress, solve their problem, buy at a deep discount, and rehab the property.  When I run my analysis, I make sure that the numbers can support a 20% drop.  Also, unless you have cash, or have access to partners or private lenders with a ton of capital, the average joe investor won’t be able to take advantage of a recession.  During a recession, traditional lenders don’t lend as much.  You’ll most likely get stuck watching on the sidelines.  

In short, now is the time to start.  If you buy correctly, you’ll be fine when a recession comes. 

@Shaquan Webster - if you buy a deal with decent fundamentals and plan to hold over a long period, what happens short term (10 years<) it doesn’t really matter. Rents typically remain and you only lose money if you sell.

If you’re a buy and hold, long term type of investor that is buying good deals then the next recession, whenever that may come, is a non-issue for you.

I'd recommend finding off market properties. I've been buying everything off market this year in a very hot, competitive market. Buying this way, I get deals where what the economy does is not a factor. I've got a connection to Chesapeake, VA I've strongly considered splitting my time between Southern Maine and that area it's so nice there! Any insight into the market there would be great!