Recession advice (by Jen [OH]) Jun 22, 2019 7:31 PM|
Recession advice (by Deanna [TX]) Jun 22, 2019 8:16 PM
Recession advice (by Sean [OR]) Jun 22, 2019 10:39 PM
Recession advice (by Robert,OntarioCanada [ON]) Jun 23, 2019 12:14 AM
Recession advice (by Robert J [CA]) Jun 23, 2019 12:46 AM
Recession advice (by BRAD 20,000 [IN]) Jun 23, 2019 1:13 AM
Recession advice (by nhsailmaker [NH]) Jun 23, 2019 8:24 AM
Recession advice (by myob [GA]) Jun 23, 2019 8:25 AM
Recession advice (by AllyM [NJ]) Jun 23, 2019 9:57 AM
Recession advice (by JAC [OH]) Jun 23, 2019 11:26 AM
Recession advice (by Tim [IN]) Jun 23, 2019 12:35 PM
Recession advice (by NE [PA]) Jun 23, 2019 12:48 PM
Recession advice (by AllyM [NJ]) Jun 23, 2019 1:38 PM
Recession advice (by Sisco [MO]) Jun 23, 2019 6:55 PM
Recession advice (by Pmh [TX]) Jun 23, 2019 8:43 PM
Recession advice (by Deanna [TX]) Jun 23, 2019 9:06 PM
Recession advice (by Tim [IN]) Jun 24, 2019 7:58 AM
Recession advice (by David [MI]) Jun 24, 2019 9:35 AM
Recession advice (by myob [GA]) Jun 24, 2019 10:16 AM
Recession advice (by 6x6 [TN]) Jun 25, 2019 7:05 PM
Recession advice (by Ray-N-Pa [PA]) Jun 25, 2019 10:21 PM
Recession advice (by 6x6 [TN]) Jun 26, 2019 5:30 PM
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Recession advice (by Jen [OH]) Posted on: Jun 22, 2019 7:31 PM
1- if you are not in a Major Market how much do you expect if any your rent to drop? What percentage?
2. What is it that you would expect with people who have lent private money in the past? Would they be more or less incentivized to do it oh, and with the rates be lower or higher?
3. People who have only played in the stock market because that's all they know oh, will they be highly incentivized to pull their money and invest it privately?
4. If you have any balloons do in the next couple years does that concern you if you are in a high equity position?
5. Do you see a big difference between expectations of evictions versus what we have right now? --199.114.xxx.xxx
Recession advice (by Deanna [TX]) Posted on: Jun 22, 2019 8:16 PM
I'm not in a major market. (Poor, rural, economy based on oil and gas.) The last time around, it had more of an impact on how long it took to fill vacancies, because people were staying put more, and the ones who were moving were undesirable. But it didn't really affect the rent rates themselves.
So how much it impacts you is partially related to what you have that's bringing people to your town--- just because the overall economy is suffering doesn't necessarily mean that everyone's lives stop. It just means their spending gets reined in; they're more cognizant of their expenses; people feel less secure in their jobs; and so on. But at the same time, other things go up-- everyone goes back to school to get a degree to make themselves stand out in the pile of resumes, or change career paths. Or perhaps they join the military. So ll's in university towns/military towns might find themselves in a better situation than ll's in a town with a stagnant population, or ll's who market to people in foodservice or entertainment. --107.77.xxx.xxx
Recession advice (by Sean [OR]) Posted on: Jun 22, 2019 10:39 PM
There is a huge rental housing shortage here, so I don't see the rents decreasing. I think rents will continue to rise.
I would think people that lent money before would still be lending, but maybe their qualifications would change a bit to make the loans more secure. --47.28.x.xxx
Recession advice (by Robert,OntarioCanada [ON]) Posted on: Jun 23, 2019 12:14 AM
One way to improve things in rough times is to look at improving rental units while reducing operating costs. Found shopping at few different Habitat for Humanity restores for building materials, plumbing, electrical, tiles, power tools to better value then big box stores as could buy more for less. Energy efficient rental units will always have higher demand. A split heat pump will cost more to install but will heat and cool at half the cost of electric baseboard heat. A will insulated rental unit utility rates will be more affordable where easy to rent during the winter time. Supply and demand where the most efficient rental unit is the best option. Was at a Habitat for Humanity restore where seen porcelain tiles much better quality then the big box store quality. It is common for people to buy a power tool for a job then return with no intention of buying then that power tool perfectly new winds up at the restore for a good price. A ceiling fan or light fixture, door does not have to be new but in good working condition. If you see something you like buy as a hour later it is sold. --147.194.xxx.xx
Recession advice (by Robert J [CA]) Posted on: Jun 23, 2019 12:46 AM
Since I'm in the middle of one of the largest real estate markets, Los Angeles, I've done my home work over the past 35 years and reached out to other developers/contractors from all over my State (California). Here is what I learned:
In the 3 complete cycles that I've lived through as an investor, rents have only declined around 10% even when the underline values of property dropped between 40 to 50% -- in the major metro Los Angeles area.
This is not true for other smaller niche markets. Some examples:
Las Vegas a resort town. Small towns with military bases that rely on the soldiers spending/living in or near to the town. When the values dropped around 50-60%, do did the rents after time.
Also some college school towns that loose Federal Funding and then enrollment drops, so do rents.
In case of recession, unless you have a major stock pile of money to hold you until things return, it is better to be diversified to weather all storms. --47.156.xx.xx
Recession advice (by BRAD 20,000 [IN]) Posted on: Jun 23, 2019 1:13 AM
My experience is that people and banks pull back. Like Deanna said the good renters hunker down and stay put so vacancies are slower to fill.
Fewer applicants have jobs or move in money.
Jobs cut back so folks are laid off.
Banks call HELOC loans and slow payers to cover the bankís exposure.
Buyers donít buy because they are nervous and banks stop lending to investors.
My best advice: eliminate debt. Pay OFF loans. Paying the DOWN does not matter. Equity does not pay the bills.
Hoard some cash to cover emergencies and major repairs that WILL come. Roofs, furnaces, and AC donít stop in a recession. More move outs. A single housebeater can cost you thousands and set YOU back.
Do NOT let ANYONE fall behind AT ALL.
I just sat thru a seminar where the guru admitted MANY of their students lost it all because they were over leveraged and could not keep up in the last recession.
Recession advice (by nhsailmaker [NH]) Posted on: Jun 23, 2019 8:24 AM
There are no economic metrics that say a recession is coming.
Economists can't even explain why we are in such an amazing economic boom without inflation
There are always mild economic down turns and none last long
I do not waste my time on issues that are not present in my life
Recession advice (by myob [GA]) Posted on: Jun 23, 2019 8:25 AM
I hate to get political BUT. WHY are some states not in a major market-- or considered a major market-- because working people are getting smart. They've had enough of the GIVE AWAY MY PAY CHECK schemes of the politicians.
We are being flooded here in GA with people moving from the left coast country of CA, NE-- it's the whole NE corridor moving for things to be better and more cost efficient.
Here in GA your typical walmart shoppers and employees alike can live pretty well-- without being taxed taxed taxed to death.
My sister who lives on LI about 60 miles from NYC pays over 18000.00 in just property tax-- along with 8.75% sales tax-- that's not including car tags and all the other "special taxes". We live in metro ATL. Have the same size home-- we paid 650.00 property tax (yes same size home) and 7% sales tax and 20.00 for a tag.
I've read many story's here from folks from these over priced cities and frankly I don't know how you all do it???? --99.103.xxx.xxx
Recession advice (by AllyM [NJ]) Posted on: Jun 23, 2019 9:57 AM
OK, we are in solar minimum again which is part of the sun's eleven year minimum/maximum cycle. So it's colder and wetter. Last cycle, 2008 was the middle of the cycle and that's when people started losing their homes and the economy crashed. The people who lost homes were buyers who purchased with the 200K mortgages offered by Pelosi and Reid through congress. They could not afford to heat their homes and pay the mortgage, remember it's colder and wetter during this part of the cycle. Also oil was very high priced due to increased demand and some flooded and closed refineries. And Pelosi and Reid imposed a mortgage clause that the homes could not be resold for five years. So people were evicted and lost everything and the lenders crashed. This time we should have adequate energy if the Iranians don't close the Straits of Hormuz. Thank the president that we are not at war today. If he can manage the energy issues there will not be a recession during this solar minimum. The current home buyers giveaway is a grant that is a downpayment and has to be paid back if the home is sold. But people CAN sell the homes to get out of debt. So you could find some people anxious to sell during the next few years until the sunspots, which throw a lot of heat, return in 21-22. A vote for the D party is a vote for a recession. --173.61.xxx.xx
Recession advice (by JAC [OH]) Posted on: Jun 23, 2019 11:26 AM
Sunspots.... who knew. --66.42.xxx.xx
Recession advice (by Tim [IN]) Posted on: Jun 23, 2019 12:35 PM
When 2008 hit, vacancy went 30%. I dropped re t by 25% just get them filled. Then moved rates over the years while the market recovered. Could have tried to stay at the original rent, but it would have taken longer to fill...
People in the stock market always says it will turn around. Even though they lost 50% of the stock market wealth. --107.77.xxx.xxx
Recession advice (by NE [PA]) Posted on: Jun 23, 2019 12:48 PM
Ally, how do you function in this business? Especially when shtf? --50.32.xx.xxx
Recession advice (by AllyM [NJ]) Posted on: Jun 23, 2019 1:38 PM
Some practical tips to keep tenants paying the rent if the energy costs go up and they pay for heat etc. is to encourage them to spread payments over the 12 month plan that most power companies offer. You can also insulate attics which is a great money saver and that will help tenants to keep paying you rent. Also insulating inside the basement near the plate is a good idea. Caulk drafty windows for the tenants and offer plastic window film which works miracles. Make sure your snow moving equipment is ready to go if your area is one that will be hit by excessive snow. If you are having excessive rain now or had excessive snow last year, that's you. Make sure the window AC units are out of the window where possible or covered with window film. The money you save your tenants on energy to keep warm, goes into your pocket. --173.61.xxx.xx
Recession advice (by Sisco [MO]) Posted on: Jun 23, 2019 6:55 PM
Good topic for discussion Jen!
1.) I dont anticipate a DROP in rates, stagnation of rates at current levels.
2.) Re: private lenders - my guess is mild/moderate recession wouldn't likely affect you with a lender that you have dealt with in the past.....provided you were good to deal with.
3.) Not many will pull their market money are redeploy into real estate. Many will lose their market money and then enter RE without cash.
4.) Balloons should always be scary.
5.)Evictions are more likely to decrease during a recession.
Recession advice (by Pmh [TX]) Posted on: Jun 23, 2019 8:43 PM
but but but JAC....you saying the sun spot cycle is NOT a rational investment strategy ???? we did some hotel refis (10 yr cmbs coming to term) in depth of credit implosion. the big boys always have private $ available with good history & fundamentals. not sure why Tim you went to 30% vacancy ? Where did renters go to live ? --107.77.xxx.xxx
Recession advice (by Deanna [TX]) Posted on: Jun 23, 2019 9:06 PM
I might be way off, but I had the impression that recessions affect homeowners more than they affect "the rental pool". Homeowners who lose their houses go off to join "the rental pool." Depending on your rental criteria, people who failed to be good homeowners can make very good tenants... not everyone's cut out to be a homeowner, and we all know how many people who shouldn't have been given mortgages were given mortgages just on the basis of "they ought" to have the opportunity, even if they had little chance of success of keeping and maintaining a $250k house on a fast food income.
One of the things that has been observed by others-- when many people tighten their belts, they don't suddenly stop eating out. Instead, they eat at the next tier down. If you're eating at a $100/plate place on a regular basis, you're not going to suddenly learn how to cook, you're going to start eating at a $50/plate place and be proud of yourself for your economy. If a $50/plate place is your usual go-to restaurant, you're going to downshift to, like, Olive Garden or Red Lobster. If Olive Garden or Red Lobster is your usual treat, you're going to downshift to Denny's. If Denny's is your usual dining destination, you're going to downshift to fast food or Waffle House.
Which is totally why I'd buy a Waffle House franchise in a heartbeat, if I could, but those are hard to come by...
So, I would expect something similar to happen with real estate. If you're renting $3000/month places, you're going to have a much smaller pool of prospects than usual during hard times. Some of the people who used to be able to afford you will now no longer be able to afford you... and some of the people who currently can afford you will be reanalyzing their spending priorities, and might find themselves economizing in a $2000/month place. Or a $1500/month place. Whereas those places that rent for $400 or $500/month are going to keep doing business as usual, although there may be a higher proportion of undesirable prospects that need to be filtered out. But the more "ordinary Joe" your rentals are, the higher the demand for your places... because you don't just have ordinary Joe's, but you have people who would normally consider themselves "too good to settle." --96.46.xxx.xx
Recession advice (by Tim [IN]) Posted on: Jun 24, 2019 7:58 AM
Pmh- rv capital of the world. People left for South Carolina and Florida. Three years later, they came back home! Lol
Lot of my guys were working for companies that supplied the RV companies. So they would work one or two days a week, the RV companies were shut down. Check would be smaller than unemployment check. So they had to move in with other people to make ends. 3 and 4 bd houses stayed full. Two families in one house. My 2 bd apt units went empty... People that built the RV, no work, but they collected unemployment check. --107.77.xxx.xxx
Recession advice (by David [MI]) Posted on: Jun 24, 2019 9:35 AM
"Here in GA your typical walmart shoppers and employees alike can live pretty well-" I misread this at first (I initially read it as WM shareholder haha!) but I suspect there's not much daylight between the WM shopper and employee pay! --144.250.xx.xx
Recession advice (by myob [GA]) Posted on: Jun 24, 2019 10:16 AM
AllyM maybe we could compare our theroy's. I have the big bang theory (13.8B yrs ago) , UFO's figured out and quantum physics i'm writing up as we speak.
Sun spots? That is just so old school! --99.103.xxx.xxx
Recession advice (by 6x6 [TN]) Posted on: Jun 25, 2019 7:05 PM
I bought my rental after the recession started so I really don't have any experience yet as to how rents will go during a recession but I suspect mine would not really go down much if any.
Myob, here in TN the sales tax is 9.25% and tag renewal is 65.00 for passenger cars and higher for trucks. Property tax in the city for 1000sqft home and 1/2 acre is close to $1100 and that's with me fighting it. We pay two property taxes in the city(city and county). --73.120.xx.xxx
Recession advice (by Ray-N-Pa [PA]) Posted on: Jun 25, 2019 10:21 PM
A) The time to develop the banking relationship you will need is to establish it BEFORE a down turn. Do this with a LOCAL bank like Andover Bank.
B) In a down turn NATIONAL banks are an excellent source for properties as they are dealing with too many properties and are dealing on a national scale. They are a royal pain to deal with in getting a loan in a recession. Use that local bank.
C) If the international exchange rate runs away like it did in 2007, the Bank of Scotland was unloading properties at 30% off, the Germans were at about 25%..........thanks to the young Euro. No Bank of Scotland near by? You might know it better as Citizens Bank.
D) Banks will look harder in a downturn, but if you already have a track record, the review is far less taxing.
Market Place -
A) You are in an steady market place. Property values didn't go down that much over all.....there are a lot of folks on fixed incomes where you are at.
B) Market times will increase a couple of months, but that isn't earth shattering where the typical market time is 4-6 months
A) Vacancy rates can climb, so you need to know this now and lock in your keeper tenants.
B) Use your tools to incentive the behavior you want - if that is filling places offer that move in special that Jeffery mentioned at the convention with the discounted deposit for well qualified apps.
A) Everyone has money and access to cash today. If banks tighten up standards, more people will want hard money and the supply doesn't really go up in a recession.
B) Don't schedule balloons due in a downward market.
C) The time to pick up discounted notes is during a recession.
Last downward cycle, I was vacuuming up a deal about every three weeks. Now is the time you start to prepare for that time.
Where there are many nay sayers out there, I am expecting the market to start turning soon. The fed has even said they may even reduce rates in 2019. Couple that with the EU ramping up a round of QE2. Can I tell you what will be the shock that sets off the downward cycle - nope. Not going to try.......some things that might do it though: impeachment, war in the gulf, trade war, or oil shock to the economy to name a few.
With just a limited number of workers out there joining the workforce compared to the baby boomers leaving it - strain will be on to raise wages. Illegal immigration - Bad....legal immigration - good...just bring a skill with you.
The tariffs, have impacted my frig buying. Washers, driers and frigs are all up about $100 each. I don't see it yet on stoves for some strange reason.
So if the cost of a deal is more, if labor is more, and materials are more............should you go crazy with growing your empire? There will be easier times ahead. Grow today, but do so ever so slowly --24.101.xxx.xx
Recession advice (by 6x6 [TN]) Posted on: Jun 26, 2019 5:30 PM
Thank you Ray-N-Pa for sharing your detailed thoughts. --73.120.xx.xxx
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