Investor · Indianapolis, IN · Member since 2016 · 232 posts · 133 votes
I'm curious to know if there was any special tactic used to survive the '08 downturn. When the market crashed and folks were losing their jobs, I'm guessing some of the renters weren't able to make payments because of the layoffs.
How did some of the investors survive this crash? I see most of the folks here started investing post '08.
All the rentals that I own were purchased at less than 80% of market value, at the time of the purchase, which is what I try to target. Currently, they are closer to 50% of market value and I haven't been in a rush to refinance them, as I feel like the market is topping out.
Generally speaking, I keep 6 months of operating expenses in reserve.
The key is not being overleveraged and having emergency capital, so if rents go down or property values drop, you're still in the black. One of the problems of all these 'No Money Down' tactics is they often leave you overleveraged, and if things go south, investors can't afford to pay their debts.
@Christopher Brainard I agree. Do you go out with a specific number in mind when buying a property, apart from the usual 20 or 25% in mind? Also, do you have a rule of thumb, say like 3 months operating expenses, in case of cash reserves for each property?
All the rentals that I own were purchased at less than 80% of market value, at the time of the purchase, which is what I try to target. Currently, they are closer to 50% of market value and I haven't been in a rush to refinance them, as I feel like the market is topping out.
Generally speaking, I keep 6 months of operating expenses in reserve.
@Mihir Bhimaraju Options were a nice strategy that survives downturns. Controlling the property without owning it, while putting up small amounts of capital upfront.
@Casey Mericle thank you for suggesting that. I'll have to look into how options work. I just got started and I'm into 5 units. Bought them for around 85% market value. I have reserves for them but it's nice to know other strategies like the one you suggested.