Market Crash Or Just Hysterical Paranoia?

5 Replies

Hello everyone, 

First and foremost I have to say that I am not an experienced investor but i'm also not an idiot, I understand numbers ( at an intermediate level ) as it pertains to real estate and cash flow which is exactly why, now that I have a decent amount of cash to invest with, I'm eager to get in the game in order to start learning and build up my portfolio. Due to the recent events with covid I've noticed a good amount of homes pop up for sale at lower prices than normal (Houston), I'm eager to take advantage of some of the deals but before I jump the gun I would like to hear some feed back / advice on what i should be weary of considering this overall economic down turn ( lot of unemployment happening in the oil industry down here) . I'm not going to let this stop me from getting in the game but i do want to have a strategy in place should whatever property I purchase start to go down in value. As of now I do plan to live in this home for at least two years with my ideal entry strategy being to find a property that I can appply FHA 203k then cashout refi using those funds to purchase my next property (this is probably already a very typical strategy) .. Can this be done with multifamily? Thanks..

@Steven Johnson I don't have any insight into your market specifically so I'll have to defer to someone else on that BUT I do have feedback on the general question of investing when people think we're about to have  crash. 

I frequently hear investors complain that there are no deals and that they wish it was 2008 and there were cheap properties everywhere. However, in 2008 nearly everyone was saying real estate was a doomed asset and finding lenders was extremely challenging. Point being, if you can't invest (in a good deal) now then you're most likely not going to when the market does crash. 

Find an undervalued property, add value to it further so you have a significant spread between mortgage/value and keep conservative amounts of liquidity on hand. That's it.

I was in the middle of a BRRRR when Covid hit, it was a good deal so it didn't matter. I've continued to make offers through the entire thing because my numbers are conservative and I have a cautious amount of liquidity.

Maybe the market will crash tomorrow, doesn't really matter. I'm looking at a long holding period (sounds like you are too) so as long as I continue to be conservative and hedge against total loss I will keep making offers. I'll reiterate that I know nothing about your local market, but assuming it's not getting completely decimated, you should probably be doing the same. 

-Dan