All Forum Posts by: Tania Reuben

Curious, what are your thoughts on section 8 from this perspective?

Originally posted by @Brian Burke:

@Tania Reuben sounds like you already know my story, but there were two key elements to my survival.  First was that I saw it coming--sort of.  I knew something was wrong, and by 2004 I knew that buying was hard to justify so I pulled way back.  Didn't  jump back in full speed until 2008.  The second thing that helped me survive was when I did jump back in, I jumped back in buying foreclosed property at humongous discounts.  I guess there was a third thing, too--I refused to give up when things were rough and fought my way through it, even when that meant paying out of my own pocket to protect my investors.

What's interesting, however, is my experience was the exact opposite of @Michael Ealy.  My biggest challenges were in the lower-tier properties.  What I found was the recession-proof stuff was class A and to only a slightly lesser extent class B.  What I observed was class-A cutting prices to attract occupancy.  Class B people that still had jobs and good incomes moved up to class-A because their prices were so close to the class B unit they were renting.  That exodus caused class B properties to lower their rents, which attracted the class C tenants that still had jobs and good incomes.  Class C cut rents and there were no takers because the working-class sector was hit so hard with job losses.  So that left class C properties with occupancy challenges and a lot of difficulty collecting delinquent rents.  Class D stuff was even worse--people were just moving in to take advantage of a free month move-in special and then sit tight to see how long it would take for the landlord to evict them.  Once evicted, they repeat the process at the next property.  I suppose it was no coincidence that most of the foreclosures that I saw were in the C&D space and it's also no coincidence that when market cycles mature, capital has a flight to quality to protect the downside.

I think the key to surviving the next adverse cycle, whenever that may happen, is to not take on too much debt, stress-test your numbers, and invest in growing markets (where people are moving TO) in good quality properties.  Sleepy markets, or worse, markets where people are moving FROM, are likely to inflict the most pain or at least present the most challenges.

I have a call out on a property in your neck of the woods.... I have a trusted family member in that area, so it's on my radar.  I'm targeting areas like the ones you're mentioning because of the solid rentals... although the trickiest thing I'm finding in those same areas is getting a good handle on vacancy rates.

Whenever I hear too much... you can't lose... I get nervous... something can always go awry. 

I'm trying to learn AS much as I can from those who have done this, so I can structure my business accordingly and hopefully dodge a few sinkholes in the process!  

Originally posted by @Michael Ealy:

Originally posted by @Tania Reuben:

Inspired by @Brian Burke's harrowing story of surviving the economic meltdown, I'd love to learn what other lesson's people gained through that time.  

Many survived, some thrived, lost it all... 

While I don't think we're going to see another down turn like that for a long, long time, I do think that protecting your downside is always smart.

In Brian's story, I learned that a bank will foreclose on a property EVEN when all payments are being made on  time because the ratio's are no longer good and they need the loan off the books... paying or not (if you haven't read his story, it's in the forum and worth studying).  I wasn't aware they would/could do this.

Would love to learn about any lesson's learned during the meltdown.  

 Tania,

Great question. I actually wrote a post about it before. Here it is:

https://www.biggerpockets.com/forums/432/topics/745147-how-to-survive-and-thrive-when-the-recession-comes

But here are the quick answers:

1. I survived because I have properties in C/D & F areas of Cincinnati. Lower income rentals are not affected by the recession. People trade down when the economy worsens. You want to survive the next recession? Don't overlook C areas. Having them is one of the ways to "recession-proof" your portfolio.

2. I have access to private capital. Most of my competitors had become reliant on bank financing. Most banks didn't want to lend money at that time.

3. I continued buying and selling. I bought & sold non performing notes. I did shortsales. Sold some and kept most for cashflow. Investors who got spooked by the recession and stopped buying regretted their short-sighted decision and them giving in to fear. As Warren Buffett said "Buy when everyone's afraid". That's exactly what I did.

And what's amazing is that like Brian Burke, I never lost money for my investors even during the 2008-09 Great Recession. A lot of the young apartment syndicators today have not been through that. Some of them will be in for a "rude awakening" when cap rates start rising again as some of them have marginal deals and they will make their investors suffer greatly.

I hope I am wrong but unfortunately, history does & will repeat itself and people are susceptible in making decisions driven by greed and fear!

I actually believe that the  meltdown was so  extreme that we're unlikely to see anything like it in the forseeable future, but that doesn't mean there are not big lesson's to be learned.


Originally posted by @Junior Soares:
@Tania Reuben Dont sell, keep holding and keep them rented. Rental demand is alot higher during downturns! In most cases, if you hold throughout your lifetime your properties will be worth more than you paid.

Originally posted by @Account Closed:

Honestly the best downside protection for 08-11 was simply not buying into the bubble building up to 07. That crash was well telegraphed and the bubble was obvious. Real Estate wasn't the only thing flashing warning signals, the build up of garbage debt from securitized subprime crap had been a slow train coming. 

For someone unaware at the time, all they needed to do was take a peek at the local case-schiller home price indices and those red flags should have tipped them off to start digging around to find out where we were in the market cycle, and what were the well advertised risks.

For those who unfortunately bought during that time, the best protection was to go easy on the leverage, make sure the property cash flows, and to have cash reserves.

For those who didn't get sucked in, 09-12 was a absolute gold mine for most asset classes, the likes of which we shouldn't reasonably expect again as a jumping off point in our adult lifetimes. 

Did you have to offer rental concessions to avoid tenants getting behind or having to evict anyone?


Originally posted by @Dawn Brenengen:

I held on to everything I owned and rented it like normal.  Business as usual.  

"The only way you lose in Real Estate is IF you sell when the market is LOW."

However, reading the story of someone who didn't default and had their loan foreclosed... I didn't realize this was possible.  

Originally posted by @Russell Brazil:

Dont sell real estate when prices are low. Pretty simple survival method.

https://www.google.com/maps/place/Batavia,+OH+45103/@39.0781199,-84.4665714,11z/data=!4m5!3m4!1s0x8841041c5a7ed7a5:0x93b53fa61be2d957!8m2!3d39.0770072!4d-84.1768795

Originally posted by @James Wise:

Originally posted by @Tania Reuben:

What are your thoughts on Batavia County in Ohio?  

I have some boots on the ground in that part of the world.

Originally posted by @James Wise:

Originally posted by @Tania Reuben:

That's been my analysis as well... seems like you can find deals that will just cover costs, but not flow... which means they aren't hitting any of the metrics Brandon advises to target. I'm planning on funding this from a self directed IRA, so I do intent on staying conservative in my approach.

Where did you decide to look out of state?  I have some strong contacts in Idaho and Salt Lake, so considering those markets, or Nevada & AZ, because they are closer.

If you do decide to go out of state some of the more popular markets are listed below in no particular order.

• Cleveland, Ohio
• Dayton, Ohio
• Toledo, Ohio
• Youngstown, Ohio
• Cincinnati, Ohio
• Memphis, Tennessee
• Birmingham, Alabama
• Kansas City, Missouri
• Saint Louis, Missouri
• Indianapolis, Indiana
• Detroit, Michigan
• Erie, Pennsylvania
• Louisville, Kentucky
• Milwaukee, Wisconsin
• Jackson, Mississippi

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Never heard of it.