&#x27;08 RE Crash - What Was Going On In Your Life?

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

6y

Originally posted by @Lukas Zupan:

Now, over 10 years later I realize that all the markers are in place to betray another correction is imminent, and..."overdue".

There is no right or wrong answer, just feel free to share whatever comes to mind arund that time.

While I have no real opinion on an 'imminent' correction, reliving the GRC makes me cringe overall.

I had 36 rentals and just purchased my 3rd primary residence with 2 small kids. Thankfully it had a mother in law apt to help weather the storm when my wife was laid off. The state provided a 20hr/wk unemployment comp pkge to help us eat and I hadn't had a w2 since '02.

About 1/3 of my tenants either bought a house with the $8k credit or consolidated and lived with family, friends. At first. Then the foreclosure started hitting and my applicant quality rose significantly. While A class overbuilds were offering 2 months free, my b class townhouses were filling fast and rents were rising. My rural c class apts suffered with slow and no pays and vacancy.

Then the credit crunch. My lines of credit and credit cards froze and or went to penalty pricing. Couldn't finance any commercial assets period. Prices were attractive but cash was king. Thankfully none of my commercial loans' 5yr call times hit from 09-11. They would have called for sure as the regulatory environment in Washington was completely uncertain. Banks just love uncertainty LOL.

I remember writing credit card checks to pay my property taxes. I remember saying crap, that line froze, try another one.

Now I have fat reserves, fat equity and don't mind purchasing with cash .I use private lenders vs commercial loans and you couldn't get me to blanket collateralize multiple properties if you paid me. Helocs have fine print and gotchas. 401k loans are due right after you get paid off. But keep on borrowing if you want to.

While most others are partnering, syndicating, refinancing to max leverage, I'm ok to zag. I will have a good chair when the music stops and won't miss a single nap.

32 Reply

Nicole Heasley Beitenman

Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes

6y

I was only 17 so...celebrating my newly-acquired driver's license and shopping for prom dresses.

But in all seriousness, the crash had a profound effect on myself and many of my peers. I know your post is not aimed at younger investors like myself, but I couldn't resist chiming in; the recession shaped the foundation of my adult life.

In my friend circle, we ALL had at least one parent, if not both, lose a job. We saw retirement savings wiped out. I was dead set on becoming an English teacher and switched to accounting in my junior year of college, and that decision had roots in my experience of watching the recession play out as a teenager. I don't trust 401K's or the stock market because of it. I will never feel a sense of job security outside my own entrepreneurial pursuits because of it. One of my family members is fighting to get out of an underwater mortgage because he bought in '06; it's been almost 15 years, and my family (and home town) are still feeling the effects.

All that being said, I'm still not so risk-averse that REI doesn't suit me. I'm not hiding under my couch in fear of another crash, nor am I putting off investing plans waiting for some huge drop in prices. But the recession is is an underlying factor in why I have never had much interest in building a business around anything other than buy-and-hold residential properties. It's like @Paul Moore said on podcast 285--I want my investing to be as fun as watching paint dry.

14 Reply

Account Closed

Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes

6y

A crash is a good time to buy on sale so have your ducks in a row

🦆 💵 🦆 💵 🦆 💵 🦆

That being said you may not see another crash in your lifetime check out this video on how the economy works

Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

6y

@Lukas Zupan, Those two posts by @Steve Vaughan and @Nicole Heasley Beitenman are more valuable than every Rich Dad Poor Dad book ever printed!!!!!!

Memorize every word of those two posts!

Where was I? Wishing for a rock to crawl under and feeling like the steam roller had already run over said rock with me under it

Learning on Friday March 16, 2008 why 47 out of 54 new construction Biscayne Bay waterfront condos didn't close on Tuesday March 13 as scheduled (Underwriter was Bear Stearns Oh goodie)

Trying to access heloc float money on one vacation rentals (frozen).

Trying to find rentors for two small MF properties (squatters)

Trying to collect on mortgages for some large sales (Builders and developers all BKs but took some oil interests in lieu - that was OK).

Trying to short sell 2.5 mil in property for $300K (that one I accomplished - oh goody :(

I just call em "The dark days". Good news is recovery is easier than building it the first time :) . Tough times don't last - Tough people do.

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24 Reply

Nicole Heasley Beitenman

Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes

6y

@Dave Foster Why do you say, "recovery is easier than building it the first time"?

Corey Hawkinson

Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes

6y

@Steve Vaughan I love your post and specifically the last paragraph about you being ok to zag. I have a picture at my desk with “duck, duck, grey duck”. My coworkers just think it’s a joke, and people outside Minnesota wouldn’t understand, but to me it goes deeper. I’m sure no one wants my grey duck rant, but it’s important to remember that even if 98% of people do/say/think one thing, that doesn’t make them correct. Never follow the lead just because others are doing that.

5 Reply

Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

6y

@Nicole Heasley Beitenman, Kind of a twist on the old saying that the second million is easier to make than the first one. Once you've been there and done it you've hopefully learned how. Recovery is using what you know to rebuild. That's usually easier than starting from scratch.

Of course I would have preferred recovery from a flesh wound instead of an arterial bleed :). But we don't get to choose the field - just how we play the game.

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4 Reply

Medi Sarwary

Pleasanton, CA · Member since 2016 · 73 posts · 48 votes

6y

I had the same experience as Nicole. It truly shaped who I am today and many of the decisions I made after are attributed to my experience during the recession.

In general, the entire millennial generation was profoundly affected by the recession and this is portrayed in their spending habits and life choices.

Mark F.

Rental Property Investor · Northern NJ · Member since 2019 · 672 posts · 677 votes

6y

I, completely oblivious to the world around me, purchased an SFR. I then house hacked, before knowing that term. I never understood why getting a loan was so hard at that time. Didnt know why until listening to the BP podcast. While I sold way too early (and never should!) in hindsight, I learned quite a bit and made some money. Four years later I'm back in the game.

OP

Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes

6y

@Caleb Heimsoth I think I was in 2nd grade, so...same! Definitely no real estate for me haha. (yet)

OP

Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes

6y

@Corey Hawkinson I appreciate you sharing! I've definitely heard from others that they could have been more aggressive during the down market than they were... You'll know for next time!

Very happy to hear you got into real estate and loved it, perhaps becoming an accidental landlord was a good thing? ;)

OP

Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes

6y

Steve, I'm very impressed with all the observations you've made in regard to the experiences you've had. Others would blame, but you've taken those experiences and decided to be better prepared instead. Love it! Thank you for sharing.

Originally posted by @Steve Vaughan:

"Now I have fat reserves, fat equity and don't mind purchasing with cash .I use private lenders vs commercial loans and you couldn't get me to blanket collateralize multiple properties if you paid me. Helocs have fine print and gotchas. 401k loans are due right after you get paid off. But keep on borrowing if you want to.

While most others are partnering, syndicating, refinancing to max leverage, I'm ok to zag. I will have a good chair when the music stops and won't miss a single nap."

That part of your post is my favorite, many of my friends are now more aware - also prepping with cash and minding the gotchas ;) It's very cool to watch those who have learned through brutal and uneasy experience get ready. Either to gobble up more cheap houses with a new experience badge, or to just be prepared against a similar happening.

Zag on brother, Nap on.

OP

Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes

6y

@Nicole Heasley Beitenman I'm so happy you joined the discussion! Despite being only 17 at the time, I would never want to exclude your experience. If you are here on Bigger Pockets you are definitely in the sphere of people I'm interested to hear about. I'm only 20 myself and my own 08 story is one filled with complete ignorance that "real estate" is even a thing. ;) (so I appreciate you adding your $.02)

That being said I can see how that would have been a jarring and life-altering time for you, perhaps especially at your age. I could chat with people about 401k's and the like for HOURS. This is my life and I love it. (investing) This is certainly an overly broad generalization, but I find that most entrepreneurs vs employee's simply have a more acute sense of personal responsibility. I can tell you aren't an exception and I'm glad you take such responsibility for your life - that will lead you to a much happier life that to not. :D

To your comment about not being risk-averse, It's my own opinion that the most risky things to do are those you are unfamiliar with. Doing what you have and learning about REI will make you more familiar and thus it will become less risky. I would almost go so far as to say it's one of the least risky things to be involved in, and you can make more money and security during the "crash" as a knowledgable RE investor. You got this! My goal is to buy assets until my time is free forever.

OP

Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes

6y

@Account Closed Exactly!!! I'm so glad to hear you echo that sentiment - AKA: my plan. Many of my favorite investors that I know and trust say the same. I appreciate the video link!

OP

Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes

6y

@Dave Foster That sounds like an immeasurably tough place to be in - but it also sounds like you were tougher than that rock that you got steam-rolled under. And tougher than the times. Tough enough to recount all that and still be optimistic. (even on your reply to Nicole you lay out the truth. The truth that you don't choose what is dealt to you, just how you handle it) Heck - even be on this forum! Kudos to you Dave. Thanks for telling me about your experience, glory and all. ;)

OP

Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes

6y

@Medi Sarwary BOOM! Understandable given how extreme circumstances were...hopefully shaped you for the better? What brought you to BP? :)

OP

Oklahoma City, OK · Member since 2017 · 36 posts · 19 votes

6y

@Mark F. Haha, yep. One of the newer terms. "house-hacking" "whole-tailing" "BRRR" All dat jazz haha. So glad to hear you are back in real estate. I'm sure you'll find next time round that banks don't loan to risky people in down markets, but they will refi out to investors just fine. They still have to issue loans, and they love us.

Alvin Uy

Rental Property Investor · Los Angeles · Member since 2019 · 284 posts · 184 votes

6y

I bought my first house in Los Angeles that I "house-hacked" before the term was even coined back in 2003 (way before the crash). My wife (girl friend at the time) and I live in one room... and rented out the other rooms to friends. We discovered RE investing by accident. Read a few books and attended seminars which led both of us to pursue getting into RE investing. Started saving up to buy more.... while my wife focused on getting her Realtor license.

Fast forward to 2006, we finally had saved enough to invest. We drank the Kool-aid and bought some OOS turnkey condos in FL (through a seminar and guru Marshall Reddick RE Network). That was a big mistake buying into these so called "Armchair Investing" OOS. I will reserve my thoughts and comments on OOS investing, but lets just say... I have not invested OOS ever since. Lots of lessons learned which I wont get into now.

In 2006, the climate at the time was terrible for rentals because vacancy was extremely high. This is due to the fact that anyone can qualify for a loan to buy properties... So no one was renting!!! Our 2 condos were vacant for 6mos...which we carried at a huge negative before we decided to list them. Then comes 2007...BOOM!!!! Needless to say... it was the most stressful time I've ever experienced. Fortunately, we had a new buyer already locked-in right at the beginning of crash.. and it was a cash buyer that wanted to buy both condos. Luckily, we were able to salvage the sale in time without going through short-sale. Lost over 15%... because we sold both for our loan balance (thankfully, we had the foresight to always put 20% down... because we didn't like PMI). It could have been way worse. We were one of the lucky ones in retrospect.

In 2008-2009... It was extremely difficult to get financing and even more difficult to save more money as we were both self employed. Luckily, my other business ventures started picking up... and some of our rentals were doing better and broke even. Rents were rising as more are more were renting. There was so much inventory... It was a fire sale!!! That's when my wife and I started looking into buying up REO's and Short Sales... and when I learned to rehab properties. The rest is history. .

Only regret is, I wished I had invested and scaled up my RE portfolio after 2009.... instead of building other businesses. Its one of those "If I knew then what I know now" moments...

Lee Bell

Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes

6y

I'm an appraiser and went from a fee appraisal shop to staff at an S&L in 2003. Soon after started watching prices skyrocket, and thinking it could not end well. 20%+ appreciation is a year is not exactly real. The fit hit the shan and work slowed way down but the bank kept the appraisal dept. But that changed in fall 2009 and most of the appraisers were laid off. I somehow was kept until spring 2010 and then was gone too. Started working indy doing work for the same bank, and anyone else who would pay decent.

During the runup in prices, then the big dump in prices, we sat in our front row seat and watched the debacle and fireworks, saving our money, living in a small rental. Were first time home buyers in 2010. Values have increased more than a little. Who says you can't time the market? ;>)

There will be a recession again, but it will be different than that one is all I know.

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

6y

I was working and had some rentals...same as today but with a larger portfolio now. Back then, I had a small decline in value (maybe 5%), high occupancy, and slightly increasing rents. Real estate is very location specific.

3 Reply

John Teachout

Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes

6y

I've been interested in real estate investment for many years. I almost bought a small motel I was going to convert into apartments back in about 1986 or so. That never happened, I got married, purchased a home, had kids and so forth and so on. Still had an interest in real estate and purchased a piece of property (95 acres) in Michigan to hunt and camp on. We used that a lot when the kids were little but then moved to Georgia in 1998. I just sold that MI property a few months ago. We used the proceeds to pay off our loans and bought another property. Our first rental house we bought in 2011 with retirement savings (cash we set aside, never was invested in equities which I swore off in about 1996) I knew that there was always an intrinsic value in houses as a percentage of what new construction cost. I wish we had purchased more (like many other people) but it was a start. Took two years to refurb it because we didn't have the time to allocate to it. Rented it out and it still has that first tenant in it. Since then we've acquired properties at a fairly steady rate (the rate we can refurb them at). In 2016, we left our long time relationship with a non profit and after exploring other aviation related jobs we decided to go full time into real estate investing. Rice and beans, beans and rice described the next couple years. We're financially stable now and are enjoying this ride.

Brian Ploszay

Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes

6y

I was completely prepared and started to purchase properties. And I had some money raised.

For me it was year zero. Everything that happened before in real estate was deemed "pre-crash."

My pre-crash properties, that once had equity, were zombie properties to me. I just held on, while quite a few people I knew handed them back to the banks.

We all say, we wish we bought more. I absorbed as many as I could. No one had unlimited money. And banks were not lending. It was a cash only business for the deeply discounted foreclosures.

I remember when the subprime mortgages crashed, the day Lehman Brothers went down. And eventually GM. I was angry with Wall Street for reckless financialization of our economy. Bad mortgages were being written, because there was high demand to buy falsely rated securities.

The years 2010 to 2012 were the easiest years for real estate investing, probably I'll ever see.

Nick Gann

Real Estate Agent · Murfreesboro, TN · Member since 2019 · 194 posts · 181 votes

6y

@Lukas Zupan staryed my millionth business, but the only truly profitable of the bunch... still own it now. Wish I had focused on real estate although in some ways as a contractor it is real estate, but not as an investor.

More or less oblivious to the inner workings of an economy back then, boy have things changed.