Real Estate Investing during Recession – Heres what you need to know!

Hello and welcome back to this special transmission of the Investor Dave Show, directly from my boat on the lake. I’m here to talk about recession and why it doesn’t have to necessarily mean that you should not be acquiring properties during these times. If you’re looking to build wealth through real estate investing, these are the points you need to focus on to reduce your risk during a recession. See you in the video!

Hey welcome to the investor dave show today’s going to be a little different i’m doing it from the middle of the lake my boat my office today and we’re going to be chatting about recession i’m going to go over a few points as to why this might be a positive thing if you’re looking at buying some property so stay right till the end so as you may know a recession is

Coming some may say we’re already in it doesn’t matter i want to talk today about real estate and how you can buy more of it during a recession now if you’re new to the channel please make sure to subscribe hit the bell to get notified so you know every time i drop a new video so very quickly why should you listen to mel and i we’ve purchased over 240 units using

None of our own money no joint venture partners in canada u.s mexico and costa rica so let’s dive in the first thing i want to talk about is people qualifying for mortgages now with the stress tests and with the ever increasing scrutiny to qualify for deals this is becoming a problem for people who are looking at buying okay and it’s also a problem for people that

Are looking at selling because you can’t sell a property to someone who can’t qualify for it right so let’s talk about the underwriting of the deal so the financial institutions are actually underwriting or stress testing them so at a 6.25 in the variable and at a seven percent in the fixed now that could be going up again this is during the time of this video

That’s what it’s at so what does that mean that means that people cannot qualify for mortgages right because once they stress test the interest rates but that’s 6.25 that’s 7 interest rate it makes it hard for people to qualify for financing now let’s talk about a couple of different types of financing so let’s see if you’re using the the bigger five banks okay

What they typically have always done is they look at 100 of the expenses and only 50 percent of the income and then they look at you to bridge that gap well now with these ever increasing interest rates and they’re looking at you with the total debt service ratios and the tdi the total debt to income it’s making it even tougher now with your t4 income or your w-2

To be able to bridge that gap right for their ratios so this is an ever increasing problem people cannot call qualify for properties because of the ratios because of the stress test which means people can’t move real estate now the next point i want to make is sellers sellers need to start realizing that the prices they were asking four months ago six months ago

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A year ago they’re gone like you can’t ask for those prices anymore because like i just mentioned in the previous point people can’t qualify for the financing you can’t ask for the price that you want if the people can’t qualify for it at the financial institutions right it’s kind of a give and take scenario so what i’m noticing is it’s kind of a lag right now but

The sellers will need to start reducing their prices as we hit this recession in order for other people to be able to purchase it so this is something that once this happens prices will drop they’re already happening but prices will continue to drop and that’s where you the savvy real estate investor can pick up these properties at a much cheaper purchase price than

You could six months or a year ago so you may be thinking dave the interest rates have gone up the purchase prices have gone down wouldn’t that just make it the exact same thing well yes and no like your cash flow might be the same because your purchase price is lower your interest rate is is higher and it kind of might be a wash but so your cash flow might be

The same or might have changed now what’s going to happen with these lower purchase prices when the sellers actually decide to lower them is down the road your appreciation is going to be much higher right whereas if you bought a property in the high peak of the market and then you wait a year or two down the road well you’re still going to get some appreciation

But it might not be as big as when in the recession like we’re going into or already in those prices were going to be deflated and then once appreciation starts happening when things start changing again you might get an even bigger lift so that is something to look for once the other start lowering their prices and you buy them you can have those bigger leaps and

Bounds of appreciation down the road in a year two or three from now so wait for the prices to go down and you should be pouncing on deals to buy them now the next thing with the recession i believe right in my opinion i believe that seller financing creative financing will skyrocket and why it kind of falls in the last two points that i’ve just made people can’t

Qualify at financial institutions for the deals if the sellers still want the higher price they are going to have to hold financing right they can’t just expect to get the price that they want and then not qualify at the financial institution if they want that price and they want to help themselves capital gains wise and tax wise they’re now more open to holding

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Financing which means for someone like me who loves creative financing and that’s how i buy all my buildings these sellers that still want to liquidate and have the succession planning that they were hoping for and still get the price that they wanted will now um contemplate holding that financing for you whereas six months a year ago it might not even have been

On the radar so this will be an opportunity and i plan on fully capitalizing on it with seller financing vtp vendor take back rent to own all of those different seller financing options will become much more attractive so if you don’t have a lot of funds to get into deals this is going to be a great time again in my opinion for you to be able to buy a lot of real

Estate and make some long-term wealth the other thing as well is private lenders private investors are now flocking to real estate right with the stock markets with things happening there with crypto going down people and with inflation going up people are now seeing i want to take my money and park it into real estate whether they do it themselves not everyone’s

Real estate investors or they want to do it through you i fully plan on utilizing other people’s money who will lend it to me in different forms and then i will park it for them in real estate with the right deals making sure that i bought deals that are here that i’m going to bring up to here write those low-hanging fruit to get that appreciation and then i’ll be

Able to cash flow from day one and then down the road i will be able to refinance or sell the asset and pay back those lenders who will now have protected their money by trapping it by putting it by placing it into real estate and and hedging against that inflation so this in my opinion will just continue to skyrocket continue to bloom lots of deals are going to

Start coming up lots of real estate is there for the taking which leads me into my next point all of those people that underwrote deals a year ago two years ago whatever they they had locked in their mortgages in at at that 1.5 percent interest rate or two percent now those mortgages are coming due and i’m talking about income properties so if people purchased

Income properties back then and they made sense then with these rock bottom historically low interest rates but now they don’t what do you think is going to happen there’s going to be an influx of deals that are going to come on the market it’s going to be a buyer’s market and uh people that could not make their payments anymore so some foreclosures and i’m not

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Saying i’m advocating for this it’s just the reality of people that did not do their due diligence on these income properties a couple years ago that now their mortgages are coming up they are going to uh probably go belly up on some of them unfortunately and this is why it’s so important that when you’re buying a deal today you’re not just thinking about the

Climate today right the the interest rates today the the financing uh climate today if you’re thinking of bigger down the road uh uh thinking okay so that is going to be something that’s coming up deals are going to start to rise from power or sale or foreclosure so there’s going to be again like i just said at buyer’s market all right so to wrap things up those

Are my opinions on what’s going to be happening with the upcoming recession again you can look at it two ways you can look at a glass half empty unfortunately there’s going to be some bad things that happen to to people or you could look at a glass half full if you’re a savvy real estate investor and you’re looking at hey there’s a boat behind right and you’re

Looking at taking advantage of some of this real estate that’s going to come up no matter what it’s going to be a scenario where people who know how to purchase deals and how to purchase real estate even before this whole recession and and downturn in the market will capitalize people made a lot of money in 2008 who knew how to buy real estate some people will be

Able to change the outcome of their of their uh family the generational wealth they’re going to buy some real estate at uber low prices right and then they’re going to wait a year too and the market once it comes back because it always comes back real estate goes like this at all times with peaks and valleys in between we’re just going into a valley but then when

It starts to peak again people that botcher in the recession will be able to put tens if not hundreds of thousands of dollars more in their pocket down the road so what do you think do you plan on buying real estate during this recession or are you just going to sit on the sidelines and do you agree with me am i right or am i totally wrong comment below and let

Me know what you think and if you like today’s show make sure to check out other ones right here all right captain dave is going back to boating i’m up see you next time

Transcribed from video
Real Estate Investing during Recession – Here's what you need to know! By Investor Mel \u0026 Dave