The impact of the last financial crisis

6 Replies

I am a newbie to BP but just love all the content!  I am interested in hearing how folks were impacted during the last down turn and actions you took.  I know property values dropped tremendously but were there other issues?  More lease defaults? Inability to refi?  Just trying to think about the worst case scenario.  My husband and I have 3 single families that have been more like a hobby but we are thinking seriously about expanding and getting serious. Thx!

My advice is look for  more area specific advice.  Also, you have to understand what causes the down turn... one cause may affect your area, another may not.  For myself.  The only impact of the last down turn was that other investors started drooling over Reno and other markets.  If there was any impact in prices or volume in my area, I did not feel it... though I only bought three places between 07 and 12.   One was a 4-plex out-of-state, which I did loose money on, but I think that was due to other issues than the market.

So.... ask you local real estate investors.

@Sabrina Basht I see this is your first post. Welcome to BP

All the issues you mentioned were problems. The issues compounded each other. The main issue is lending stopped. Since there was no financing prices dropped. The only people who could buy were a very limited amount of true cash buyers.

The poor economy caused any renters to struggle to pay rents. 

However apartment buildings generally did fine. Banks extended loans rather than have massive defaults. Despite some negative issues, they survived as demand for rentals increased. If you want to take a conservative approach, minimize your leverage and keep as high a debt coverage ratio as you can.

It seem to me the percentage of housing units occupied dropped.  People lost their jobs and to reduce their expenses they would move in with friends and family.  I was thankful I was conservative with my rents because my units stayed occupied.  But if you raise rents to today's inflated market rent, tenants may move out of your unit and move to someone else's unit that is more conservatively priced.  My only other advice is make sure you live by the 2% rule if you continue buying more properties as a hobby.  Too many properties not conforming to the 2% rule is like building a skyscraper on a shaky foundation.  Best of luck, have fun!

Thanks Ned.  Did rental demand increase or drop during the last recession?  Or maybe it stayed the same?

The financial and housing crisis was actually the catalyst for me becoming a full time investor. I saw the opportunity to buy a bunch of undervalued assets.  

@Sabrina Basht , whatever stage of the economic cycle you start investing, I suggest you take your cue from what @Russell Brazil wrote:- ie. (only) "buy... undervalued assets"! Welcome to BP...

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