How to survive the next crash?

Question

Caleb Heimsoth · Answer

To add to @Brandon Ingegneri I’d also say avoid ARMs.  That’s what also screwed people in 2008-09.  They overleveraged and they were all arms which then tripled payments at once as the teaser rates expired, and then poof they go under

Mike Dymski · Answer

• Good locations
• Add value
• Cash flow
• Long term debt
• Reserves

A good recipe with any market conditions.

See below for a post on overcoming fear of the market.

https://www.biggerpockets.com/forums/311/topics/59...

Brandon Ingegneri · Answer

@Caleb Heimsoth hit the nail right on the head.  The long and short of it is to remember that bears lose money, bulls make money, and pigs always get slaughtered.  So long as you don't chase the market right to the top like a million dopes did in 2007, over lever, and have substantial short term financing in place, you are ahead of the game.  Stockpile as much cash as possible to weather a storm, be vigilant on the acquisition, and get your systems organized now while there is still stability. If you buy right, a downturn won't make you even skip a beat.

Chris T. · Answer

how much cash flow would a property need

- Depends on you, the number has to be over your PITI + vacancies + CAPEX + repairs + other potential costs you can project

Worst case scenario, how low would rent get? -50%? -60%?

- No one can predict. Only the market can tell you. What you can control are your costs mentioned previously. That's where reserves come in play.

How much down payment would be required?

- As little as possible. OPM is the best.

30 yr or 15yr loan?

- Personally, I go for the 30 yr loan. Gives you more flexibility, and better cash flow. You can always pay more monthly towards principal on a 30 year loan, but you cannot pay less on a higher 15 year mortgage.

Recommending to sell before a crash or riding it out?

- No one can predict. But there is always money to be made regardless of the cycle.

Brian Garrett · Answer

Only buy solid, sound deals and don't over leverage!

Johann Jells · Answer

Honestly, if you need to ask these questions, rather than investing in the top of a market you'll probably be better off waiting for the coming correction. Investing then is much simpler. It's coming, Zillow sent me an email today saying one of my properties went up 5% last month! I don't believe it, but it's indicative of the froth in the market.  Look at the implied GRM of 39! When RE looks like Bitcoin, be very wary.

The Zestimate for this house is $939,904, which has increased by $50,369 in the last 30 days. The Rent Zestimate for this home is $1,995/mo, which has decreased by $205/mo in the last 30 days.

Andrew Syrios · Answer

Try to keep your cash reserves high and don't overleverage. (I would try to stay under a 2:1 debt/equity ratio, although this might be tough for new investors). Focus on getting your portfolio performing too so you have very high occupancy. Also, try to build a stable of private lenders.

Recessions can be tough, but they can also provide enormous opportunities.

Scot Howat · Answer

Buy conservatively, and make sure you have cash flow.  Equity is nice too.  Luckily in the lower priced house ranges around Chicagoland the rents don't really go down.  They're pretty flat.

How to survive the next crash?

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