Is this really a good time to be in buy and holds/rentals, given that it’s highly likely we’ll have a deep recession or even depression?
If people are losing their houses, their jobs are next. So the owner of rentals seem most likely to be next in line to lose their shirts.
One would need massive cash in reserve to cover the vacancies, no?
One would need massive cash in reserve to cover the vacancies, no?
Yes,cash in reserve should be on hand always…But if you buy right,accounting for vacancies and using real numbers for expenses I see no issue…People have to live somewhere after losing their homes,I think the rental business should be fine…
RookieNYC is exactly right. If the economy does get very bad, everything rolls down hill. Rentals are the bottom of the food chain, and since people must live somewhere, they should be the last to suffer (kind of like food). People must have shelter and food, those are the basics.
Mike
That’s why I love rentals. You provide a basic need for people. Depending on your cashflow situation, you may be able to decrease your rents until the economy improves. I think the rental housing market will see a boom. :beer
Thank you.
I am finding some opportunities out here that fit my business plan,
but since I bought a house last fall for my personal residence, I wanted to build more savings in cash reserves before investing.
I know there will be more coming onto the market. . . I need to be patient. I can wholesale one of these, and that will help. I just didn’t want to get to back up plan C - renting the property - without cash to cover the note.
to overcome what’s inevitably going to take place have a substantial amount of gold & silver
Yes, that is apparent. Many of the auction houses have commercials… “we’ll buy gold… old gold, new gold,… got a loose tooth? pull it” … WE’LL Buy it."…
I learned from Katrina. Nobody was running around selling stuff for gold, but if you had a gallon of drinking water you were the man.
We had a mini depression in Houston in the late 1980s when the oil business went bust. People that wanted to sell their real estate got killed but if you were buying you could buy for 50 cents on the dollar. Buyers came out very well. It may be a bumpy ride going down but like rookieNYC said you need a cash position to help as you ride the market down. But ultimately as propertymanager said people need a place to live and as long as we pay attention to the numbers we should come out ok at the end. Rember you buy low and sell high. Right now real estate is low that does not mean sell, it means buy.
The psychology of the situation is that you look around you and see people getting killed. You tend to panic and want to get out and go home to wait it out. Remember they are not doing what you are doing. They are like prey getting slaughtered. But you are like the predator. The temptation is to look around and see death but you should be like a predator and look around you and see food.
I’m from Canada so I can a sure you that the US is just a beautiful place to spend some of my Canadians dollars buying some property. I also tend to agree with Roberts Kiyosaki’s outlook for gold & silver. I’ve read just about everything (among others) he’s ever written and he knows his stuff. Aside from his quirky nervous moments his knows his sh$$.
realnews, if you are worried about supporting a rental, do something else in real estate until you can afford to put a larger down payment on your buy and hold. The more equity you have, the lower your exenses will be, and the more margin you have for error.
Ride out the low market with your equity, and when the market turns around, you can borrow your equity out to invest in additional property.
While the market is going down, you want to be conservative with your risk taking.
The worse the economy is, the more renters there will be, but if they have no money, they will often double up in rentals. 2 families with less money will split the rent. Not something I allow in my units, but a lot of landlrods will keep their vacancies filled that way.
Real estate always goes in cycles. It will go low and then it will turn and go back up again. Just keep in mind when you invest that you want to position yourself to ride it out. The guys who buy and hold in a low market are the guys who are going to make a lot of money.
How does the 1980’s depression in Houston compared to the subprime housing crash right now?
Is a depression normally worse than what America saw in 2007?
Will you easily get properties at 50 cents on the dollar in 2008?
Just trying to gauge the differences.
Bluemoon,
I definitely see the opportunities. The bloodletting is just getting warmed up here. We have combination of foreclosures and falling prices. It’s a good thing. I think it’s just getting started here, so I know I still have another 2 or 3 years to get a little gravy on my potatoes.
Tater,
You’re right, I need to build cash while I’m getting my REI feet wet. This will be via wholesaling. I will not pull any equity out of my personal residence.
My question was prompted my a deal I’d found…little old lady, ugly house, and I was going through my options and exit strategies.
I’d rather buy and hold this one, but I may have to wholesale it so I have more cash for other BAHs.
The short answer is, if the tenant falls behind on rent, evict him/her as soon as possible and re rent the place. Still, there are notes to be paid until it is re-rented. Thus the question about cash reserves for the payments. Paying 2 notes is no fun if you only have money for 1.
realnew,
What I have learned in a very short 12 months in this real estate environment is cash is king…People do funny things for a cash deal…Not only is the buy side advantageous (price,terms wise) but if you buy correctly (way below assessed and appraised value) and you have solid credit you can cash out refi the house and get more than you paid back out( I’m talking todays mortgage markets)…Yes I just learned what probably is a very old method but I’m all the same still surprised at how uncomplicated it is…So if you are in that position I would say make insulting cash offers…
I think that cashing in some of those “government printed by the billions band aids or soon to be near worthless dollars” for some gold for a (few years) makes sense. Start loading up your canoe with gold/silver now to “get ready for the waive” The influx of fearful and greed driven (rather than driven by fundamentals) band wagon jumpers means in a few short years you’ll be able to cash in your gold to buy cash flowing properties outright.
Can’t you smell what’s about to happen…