Let’s face it – the next several years are going to be financially unpleasant for many real estate investors. You may or may not believe it; however, you should prepare for the worst – just in case.
During the last nine months, I’ve been advising my clients to sell anything they don’t want to carry through a recession, and take the profits. Now, with markets around the country already dropping, it is becoming too late.
During the last downturn, rehabbers got stuck with properties because buyers became non-existent. Flippers stopped making any offers because they didn’t know how low prices would go and how long it would take to recover. When people lost their jobs, landlords suffered as tenants couldn’t pay rent and many moved themselves and their families back into their baby-boomer parents’ homes.
The rehabbers and flippers are already pulling back to avoid a repeat of the past.
Many investors have already sold most of their holdings, including 1-4 unit residential family properties. Some have dumped most all their assets, including 5+ residential holdings – which, incidentally, I think is a mistake. Since the 2006-2010 fiasco, most baby-boomers who are parents have already downsized or are in elder housing facilities that their kids and grandkids can’t move into. Because there is already a shortage of housing in most areas across the country, as people lose their homes this time, I believe 5+ multi-family rental housing will hold their value and associated rents will actually increase because of the anticipated demand.
I don’t suggest that you stop acquiring properties during the strategic times ahead – just the opposite. During these economic downturns is when everyone runs from real estate…and these are the same times that fortunes are made by those who enter the market and acquire everything they can. When I mention this to individuals that are new to the business, their attitude is to wait and see if I’m correct. By doing so they will lose one of the best opportunities of a lifetime.
How can you do this successfully with the least amount of risk? Follow the practices listed in part 3 of this article.