What Will You Be Doing if the Market Crashes?

Lender · United States · Member since 2020 · 1k+ posts · 499 votes

Obviously only the stock market is currently being effected with the coronavirus, but lets assume in the near future the real estate market starts to feel the impact or we experience another 2008. I'm curious to hear the game plan for investors.

If you flip properties, do you plan on buying more properties since they are cheaper?

If you're a rental investor, do you plan on buying more cash flowing properties at a discount?

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

If it crashes? I will probably be doing the same thing if it didn't crash. Playing some music, buying some RE, working my job, drink a little wine on Sunday with my macaroni 😃

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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
For those of us who are always direct mailing consistently, a downturn just delivers a 5x on calls as distressed owners start to realize that they should have tried to sell before. So I am always looking to buy when it's a good deal, there are just more opportunities when the economy crashes, but that doesn't mean they are all good opportunities. When a crash comes, owners will hide more because they knew they are screwed. I just wait them out on my price and the price I offered before the downturn is long gone when the crash comes.
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
6y
Originally posted by @Timothy Hero:
Obviously only the stock market is currently being effected with the coronavirus, but lets assume in the near future the real estate market starts to feel the impact or we experience another 2008. I'm curious to hear the game plan for investors.

If you flip properties, do you plan on buying more properties since they are cheaper?

If you're a rental investor, do you plan on buying more cash flowing properties at a discount?

Buy everything I can in cash. Hold for several years until the market peaks then sell most of it off as turnkey rentals.
10 Reply
Timothy Hero
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Lender · United States · Member since 2020 · 1k+ posts · 499 votes
6y
Originally posted by @James Wise:
Originally posted by @Timothy Hero:
Obviously only the stock market is currently being effected with the coronavirus, but lets assume in the near future the real estate market starts to feel the impact or we experience another 2008. I'm curious to hear the game plan for investors.

If you flip properties, do you plan on buying more properties since they are cheaper?

If you're a rental investor, do you plan on buying more cash flowing properties at a discount?

Buy everything I can in cash. Hold for several years until the market peaks then sell most of it off as turnkey rentals.

All cash to avoid the higher interest rates I assume?
2 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
6y
Originally posted by @Timothy Hero:
Originally posted by @James Wise:
Originally posted by @Timothy Hero:
Obviously only the stock market is currently being effected with the coronavirus, but lets assume in the near future the real estate market starts to feel the impact or we experience another 2008. I'm curious to hear the game plan for investors.

If you flip properties, do you plan on buying more properties since they are cheaper?

If you're a rental investor, do you plan on buying more cash flowing properties at a discount?

Buy everything I can in cash. Hold for several years until the market peaks then sell most of it off as turnkey rentals.

All cash to avoid the higher interest rates I assume?

To drive the acquisition price down and get better deals. Targeting distressed properties with cash offers during a crash is a recipe for success.
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Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
I was just getting started in real estate during the last crash. There were great deals everywhere, but financing was difficult. I put together a couple of deals, but wasn't able to make the most of it. Next time, I will be picking up several buy and hold properties. This time around I have much more access to capital, and have the experience of the last downturn to boot.
That being said, there is no guarantee we will have a real estate downturn anytime soon. Real estate doesn't always go down with a recession, and in fact has gone up in several recent recessions. I'm not changing what I'm doing today in hopes of an impending downturn.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
6y
Buy, buy, buy, and buy some more.
If you believe a downturn is likely, you should have a lot of assets liquid. The problem with liquid assets is the return is almost always lower than less liquid options.
6 Reply
Quincy Lockett
South Holland, IL · Member since 2017 · 374 posts · 432 votes
6y
@Timothy Hero
Nothing. Continue to collect rent from my cash flowing properties. You’re only in trouble if you NEED to sell.
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
It is a major stretch to believe an exact repeat of 2008 would happen. The factors that lead to that are not in place today. If we did see a repeat, then financing would dry up, so you should have cash today.
The risk with coronavirus is way greater than what happened in 2008. They are seeing 2% mortality rate and projecting half the worlds population or more could eventually get the virus. When it hits critical mass in the US, it could shut down businesses and schools for a month or more. It would shut down retail, restaurants, car dealerships, airlines... When spending stops, businesses go into cost cutting mode and layoffs are the easiest way to cut costs. Massive layoffs combined with population loss, could be a problem for everyone.
On top of a global pandemic, it appears we will have a polarizing presidential election and a change in leadership would be a seismic shift in business policy. The effect on the stock market, businesses and housing would be profound.
Let's all hope for the best but if multiple events hit at the same time, it could cause a downward spiral.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6y
If it crashes? I will probably be doing the same thing if it didn't crash. Playing some music, buying some RE, working my job, drink a little wine on Sunday with my macaroni 😃
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15 Reply
Dylan H.
Rental Property Investor · Savannah, GA · Member since 2018 · 174 posts · 129 votes
6y
@Timothy Hero . Like @Joe Splitrock said the factors in today’s markets are completely different than 2008 and I don’t think we’ll see anything like that ever again. But, everything is connected, so a smaller real estate value correction is always possible.
As technology improves and knowledge becomes more publicized about the value of cash flowing real estate, prices will continue to rise because the demand is always going to be there. People are starting to understand just how volatile the stock market is, and how safe conservatively analyzed income producing property is. If someone can lock in long term leverage for just 6% COC returns, it's still a safer and more profitable return than 8-10% in the market.
More and more money is pouring into the real estate sector, not because it’s hyped up, but because people are becoming more educated. Which I believe will continue to drive prices up in the long haul.
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Timothy Hero
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Lender · United States · Member since 2020 · 1k+ posts · 499 votes
6y
Thanks for your responses everyone! It seems were all on the same page with ideas.
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
Originally posted by @Dylan H.:
@Timothy Hero . Like @Joe Splitrock said the factors in today’s markets are completely different than 2008 and I don’t think we’ll see anything like that ever again. But, everything is connected, so a smaller real estate value correction is always possible.
As technology improves and knowledge becomes more publicized about the value of cash flowing real estate, prices will continue to rise because the demand is always going to be there. People are starting to understand just how volatile the stock market is, and how safe conservatively analyzed income producing property is. If someone can lock in long term leverage for just 6% COC returns, it's still a safer and more profitable return than 8-10% in the market.
More and more money is pouring into the real estate sector, not because it’s hyped up, but because people are becoming more educated. Which I believe will continue to drive prices up in the long haul.

I have wondered what effect having more people as landlords will have over time. If rental properties outpace available tenants, there could create an oversupply issue. It has definitely reduce CAP rates. A hard recession with high unemployment could really hit landlords hard.
2 Reply
Dylan H.
Rental Property Investor · Savannah, GA · Member since 2018 · 174 posts · 129 votes
6y
@Joe Splitrock
I think to analyze that perspective you really just need to look at supply and demand. There is a shortage of supply for housing in most “good” markets currently. As long as there’s a demand, people will just have to settle for renting if there are no houses for sale in a specific market. If it’s a diverse market, with quality job supply, then people will live there, even if it requires them to rent and they would prefer to buy.
1 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
6y
For the past few years, some of us have been pivoting from value to cash flow plays. If there is a downturn, some of us will pivot back. And always adding value.
8 Reply
Stephanie Simmons
Flipper/Rehabber · Lakeland, FL · Member since 2019 · 131 posts · 91 votes
6y
@Timothy Hero
Means prices done down and able to invest. I’d move from flipping to rentals.
Personally don’t think we will see another 2008 unless the global investment market decides mortgage backed investments are “safe” as government bonds. Don’t think that will happen again given how bad they were burned last time.
We will have a recession. Timing is the question. Your investment strategy should work in a growing or contracting market. Buying below market value is key. Having some cash to weather a storm isn’t a bad move either.
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
Originally posted by @Dylan H.:
@Joe Splitrock
I think to analyze that perspective you really just need to look at supply and demand. There is a shortage of supply for housing in most “good” markets currently. As long as there’s a demand, people will just have to settle for renting if there are no houses for sale in a specific market. If it’s a diverse market, with quality job supply, then people will live there, even if it requires them to rent and they would prefer to buy.

True but in a recession, housing demand goes down. People take on roommates or move in with family. Even if population stays the same, it consolidates in a smaller number of units. When a hot job markets cool off, jobs are lost and population leaves town looking for work. When you loose your job, you are willing to accept all sorts of inconvenient living situations - even a car. Of course it is all very market specific. Some cities are winners and some are losers.
3 Reply
Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
6y
Define what a crash is? On a technical standpoint it means 30% correction in prices. I will be more aggressive and look for the best available deal in my target market.
1 Reply
Lauren Ruppert
Rental Property Investor · Member since 2019 · 67 posts · 29 votes
6y
@Joe Splitrock
Dang it, Joe... you're scaring me.
2 Reply
Kris L.
San Antonio, TX · Member since 2019 · 930 posts · 836 votes
6y
@Timothy Hero
Buying either stocks or distressed properties. It depends on what the specifics of the crash are.
0 Reply
Hai Loc
Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
6y
@Timothy Hero
I would keep on buying. The lower the prices goes the more you buy
0 Reply
Charlotte Dunford
Investor · Johns Creek, GA · Member since 2017 · 463 posts · 488 votes
6y
@Timothy Hero I would stay where I am. I am in the mobile home park space and when an economic recession hits, mobile home parks actualy get more phone costs as people are moving out of fancy apartments and moving into affordable housing.
1 Reply
Jon S.Pro Member
Investor · Tampa, FL · Member since 2015 · 530 posts · 92 votes
6y
@Dylan H.
Can you elaborate on the comment you made about cost benefit comparison between 6% COC return vs 8-10% return in the stock market? Thanks
1 Reply
Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
6y
Shortening my comp time distance and handling the fall out issues of an equity strip.
0 Reply
Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
6y
I highly doubt any living person will see anything even close to what we saw 10 years ago for many reasons. That beings said- the market doesn't dictate what I do. I have specific buying criteria and resources, and when opportunity and leverage align, I jump in. There's really only a couple things that change when the market softens; it's harder to borrow, so you'll be more successful if you have cash, and if you are using leverage to buy, it's likely that will go away- sort of one in the same.
Returns are always relative to the market, so you will probably have to do more to earn the same, but there will be much more opportunity as well.
1 Reply
Jai Reddy
Edmond, OK · Member since 2012 · 456 posts · 270 votes
6y
@Corby Goade
What he said. It will be harder to borrow. So line up financing now to lock in a term for a duration that will end past the period of tightened lending.
If you are on a fixed term 5+ years, you wouldn’t need to go through a refinace/vetting process on your RE asset during the downturn.
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