Have 75 doors and wondering if I’m prepared for a downturn??

[Zach Riggs]

To prepare for a softening in market I've been flipping and wholesaling more of the properties I would generally hold to save cash and raise reserves. I've also been saving the rental cash flow since day 1 for reserves and living off my real estate sales business income. I've been BRRRR since 2012 and have always refinanced out only what I have in thinking that the extra cushion will help when banks tighten during downturn and prices drop. I've also, been getting the portfolio lenders to lower my rates on anything over 5% since rates have dropped which will raise cash flow that I'm also saving. Wife those of you that invested through the recession what else should I be thinking about?

[Kerry Baird]

We have properties in the oil patch in Texas.  We bought our properties in the $85k range and when they hit oil, the houses doubled to about $165k each.  Our local tenants had been nudged out by oil workers, and rents were high.  Of course, what goes up also goes down, and we didn’t sell at the peak.  Our goal was pure cash flow in what we through was a laterally moving market, so that “appreciation” was unexpected.  

Fast forward...oil crashed, people lost jobs.  Tenants started going late. We could not solve our problem of late rents by dropping rents.  People did not have jobs all of a sudden, and with no work there was no way to get any rents at all.

I understand this is an extreme situation, and is only likely in small segments of the county.  We bought those houses all cash, and just waited it out for about six months.  We didn’t evict, but took late pays as the tenants could make them.  We didn’t have a large supply of ready tenants from which to choose who *did* have jobs, for quite some time as the city is rather small.  

Lessons learned: we now buy in places with diversified employment and a growing population.  We can’t plan for every contingency, but a large sum of money for emergencies is an absolute must.  While we aren’t likely to see the wholesale drop of the entire US property market, there are black swans that can cause troubles. 

You have anticipated the softening in your market, and appear to have taken steps to mitigate losses.  It also appears that you have cash and financing in place for the time when that softening comes, so that you can purchase more, should you want more doors.