When the s#%t hits the fan

Question

hey guys I have a question for investors with experience. When times get hectic as it did in 07, are there any changes you guys make as far as investing? When there's a reccesion, stock market crash or if the country is just ready to collapse. Is there any real estate investment that is somewhat reccesion proof? Rental, flipping etc. and is there thing you do different?

Russell Brazil · Answer

"Be greedy when others are fearful..."

During housing and stock market collapses, I go on a buying binge.

David Faulkner · Answer

Learn how to run the numbers and let that guide your strategy. There are flip numbers (profit = ARV - rehab costs - hold costs - transaction costs) and there are hold numbers (cash flow = rental income - PITI - PM - Maintenance - CapEx - Vacancy). The quick nickel and the slow dime. I run both numbers for all my purchases and make sure they both work ... one is for plan A and one is for plan B. It doesn't matter if the market is hot or if there is blood flowing in the streets or what happens next, if you let the numbers be your guide you will tend to make rational investment decisions with profitable exits.

People need a place to live, even when the SHTF. Ever watch the show "Naked and Affraid"? What do the survival experts on that show always do? They find a suitable, well located plot of land and build a shelter 1st. Then they find water, then food. Shelter, water, food, always in that order.

Of course, if it really hits the fan, then the military may show up at your door and say they now own your home, in which case your REI portfolio will under perform. If that happens, then guns & ammo will be the best investment class ... but never bet on a zombie apocalypse; even if you're right, you can't collect, unless of course you want to take your payment in BRAINS :)

David Dachtera · Answer

Yes - institutional lending does tighten.

THAT is when you learn to approach private lenders and make THEM "rich" instead of the banksters.

Bhekizwe M. · Answer

Great stuff."when others are contracting that is the time to expand..."

David Faulkner · Answer

San Clemente Island ... the trick is getting to your boat and getting it out of harbor in time, that and lots of guns & ammo; just watch any zombie flick. LOL :)

Russell Brazil · Answer

@Carlo Torres Lending guidelines tighten when that happens. So you just need to make sure you always maintain good credit and available cash to make it easier for you to borrow.

I just buy what I think is the best asset at the time.  During the financial crisis....I started buying stocks heavily in 2009. I didnt catch the bottom, but I caught a lot of the bounce back. In 2010 I started buying real estate heavily...I bought before the bottom, so my investments lost money for the first 9 months, but I was confident they would come back, and they did.

You need to be diversified in both asset classes.  Any one stock may not come back, but the market will. Any one piece of real estate may not come back, but the market will.

Ryan Dossey · Answer

Love it.

Mike J. · Answer

@David Faulkner "Of course, if it really hits the fan, then the military may show up at your door and say they now own your home, in which case your REI portfolio will under perform. If that happens, then guns & ammo will be the best investment class ... but never bet on a zombie apocalypse; even if you're right, you can't collect, unless of course you want to take your payment in BRAINS :)"

Not sure if SoCal would be a good place to be if any of that happened. Lol.

Elizabeth Colegrove · Answer

I buy when people are scare for physiological reasons, and pass when people are buying with only hype as the backing.

When the s#%t hits the fan

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