Issue #55 - Brandon Cobb, The House Buyin Guys - Page 59

Don ’ t Forget the “ Hold ” in Buy­and­Hold
It is vitally important to not just acquire properties if you want to be prepared for a recession , but also to have the capital to maintain those properties . In the event of a recession , you need to have investments that will cash­flow in a down market or that you can afford to hold and maintain until the market starts to recover .
After the last housing crash , many of those Detroit investors probably thought they would rent the properties they purchased out to people who lost their homes during the mortgage meltdown . However , a lot of those people did not need to rent a home in Detroit anymore because they left the city completely .
Between the 2000 U . S . Census and the 2010 U . S . Census , the city lost a full quarter of its population ! That meant a lot of empty homes no matter how cheaply you bought them . If you were going to hold onto those properties until they recovered , you had to hold a serious reserve of capital to sustain your budget while you waited for the recovery .
How do I identify properties that will cash­flow during a downturn and / or allow me some wiggle room to buy and hold them in a long­term portfolio play ?
I ’ m going to acquire real estate using property tax liens and property tax deed certificates while targeting markets where I know the population will likely opt to downgrade their living spaces long before they opt to leave .
Here ’ s the kind of market I like :
I want a secondary market in decent proximity to a 24­ or 18­hour city in a region where the cost of living is relatively affordable compared to regions with similar employers .
States with this type of market include :
• Texas because it hosts a lot of the same type of tech and engineering companies that used to make their homes in California , but the cost of living is much lower .
• States in the Southeast like Georgia and South Carolina and in the Midwest like Illinois . Employers in the major metro areas of these states are unlikely to “ jump ship ” for another location if the economy corrects . Furthermore , these states ’ populations will likely grow as more employers move their operations to business­friendly markets .
Image by Eric Stokley from Pixabay
Now that we have some markets in mind , let ’ s talk about what we can do to make recession­resistant real estate investments in those markets . You must factor in two things when identifying what types of property you want to buy in this scenario :
1 . Will the price give me wiggle room if “ Plan A ” gets delayed ?
2 . Is the property going to attract a resident or tenant in a down market ?
The key to accessing “ wiggle room ” properties is to simply acquire those properties below retail . Examples of ways that have historically been well­suited to acquiring properties at low prices include foreclosure auctions , buying off­market , and , of course investing in property tax liens and property tax deed certificates .
To me , this answer is simple . It is the same strategy I have been implementing for two full real estate cycles so far and that I plan to continue to leverage up to , during , and long after the conclusion of the next economic downturn .