How To Get Started Real Estate Investing During a Recession

Mike DeHaan: [0:01] What's going on, guys? So this episode is a new type of episode that I wanted to launch, which will basically be a short episode that comes out every Friday where Dan or I, we talk about something that we've been kind of pondering over the week or something that other people have been asking us sort of thoughts on, whether that's from our instant investor program or people on social media or people we know. Kind of a short solo show that's focused on a singular topic and will kind of be a shorter timeline than some of the other shows that we do. I'm not sure what's gonna be called yet. I know I've seen a lot of other people do five minute Fridays or food for thought Fridays or whatever. I don't wanna rip off those people. So if you think of anything good, let me know. Otherwise, this would just be like our one of our Friday shorts. But for this episode, something that's really relevant to right now that I have been getting asked about a lot, particularly from newer investors, well, I guess primarily from newer investors is how should they go about starting to invest as we go into a recession? Right? There's been everyone has been hot on real estate investing for the past couple of years. There's been a huge number of people who have gotten into real estate investing. And honestly, if you were investing, especially during late twenty twenty and early twenty twenty one, you made money. There are so many stories of people who overpaid for properties, went significantly over budget on their renovations, and still came out ahead just because the market grew at such an exponential rate. And now people that kind of have heard about that and they're wanting to get into it, but they recognize that that's gone away, which I mean it has as was we sort of change into a different economic cycle here.

Mike DeHaan: [1:38] There's obviously a little bit more caution and rightfully so. And so I've had several people reach out and saying, listen, I want to do what you're doing. I want to work with you in your program. I want to get started investing. How should I approach it as we go into a recession? And there's a few different things. I put together a little list of five things that I think would be helpful as you sort of start to get into investing or you're starting to grow your investing as we go into this different economic time. Full disclosure, I started investing in 2018, back when things were pretty flat. I was able to do very well over the last couple years as everyone else was, but I have never been an investor during recession. So all of these thoughts here are mostly just my opinions and, I guess, my educated predictions on things that I think would be the most helpful as we go into this. So anyway, here we go. The five ways I think you should approach investing going into this upcoming economic recession. So first thing I would say is make your focus on building your network and identifying the key people that are gonna be you're gonna be able to rely on when things get weird. If you were involved in any sort of masterminds or meetups or things like that over the last little bit, there's gonna be a lot of people that were involved in those that weren't aren't necessarily going to be able to cut over the snacks a little bit. Either they were getting lucky, or they were just there to be part of the the whole social aspect, or they're looking at carried by somebody else, which was fine back then, you could probably do some joint deals with them, you could network and there'll be value there.

Mike DeHaan: [3:11] And somewhere or another, even if it's just being around like minded people. But as things become strange and things start to slow down, you're gonna wanna find those key individuals who are really the top performers. And you're gonna want to get to know them and you're gonna want to show them that you're a top performer as well. Even if you're new, don't feel like you need to have a lot of experience to have that worth of those people. If you're new and you show that you have some gusto and you show that you're put together and you wanna get after it, you can get more credibility with those a players than you think. So first thing I would recommend is if you're looking at getting started into you start investing during this recession, the most important thing will be going into it with these stronger players in your back pocket. Right? So make networking more of a focus than even before when we were in more of a prosperous time. The second thing would be to be smart with your finances going into this next little bit and get as liquid as possible. Right? So if you have kind of some stinker investments you've been sitting on, you have some stuff that's not doing well that you're no longer excited about, or you have, let's say you have some equity in your home, which a lot of people will, and you can get a home equity line of credit on it. Do anything that you can right now to just get as liquid as possible to get ready for opportunities. Obviously, I'm not telling you to go in cash out your $40.01 k or sell your stocks or things like that. But be honest with yourself. And if there's stuff that you're not excited about and that you would rather roll into real estate, obviously, you don't want to sell when things have gone down.

Mike DeHaan: [4:41] But you also want to make sure that you have liquidity for the opportunities that are going to be coming as real estate starts to turn. It's no longer just this extremely hot overpriced asset. Right? So be smart with your finances. So don't be overspending on stuff. Be extra diligent about setting money aside to build that war chest. And then if you have any ways you can get liquid, whether that's through secured lines of credit, selling, I don't hold a garage sale, get rid of a bunch of junk you don't want, do any way you can to build that war chest so that when opportunities do come, you're ready to pounce, and you're ready to make as much money as you can in these upcoming opportunities. They say people it's easy to make money during a bull market, but people become extremely wealthy during a bear market if you're able and you're willing to take action. Because when things go on sale, if you're able to go in and jump jump into it and take action, you will have exponential gains as things start to pick back up again when everyone else is sitting on the sideline. So the third thing is when you are looking at opportunities, be more conservative with all of your estimates, particularly regarding property values.

Mike DeHaan: [5:48] So over the last couple of years, people have been buying properties based off of growth values or how they're expecting properties to appreciate just because property was appreciating so rapidly. Going into this next little period, we've actually been looking at the after repair value of our properties at less than what things have been selling for just because we are expecting things to slow down. So whether that's you're looking at your your ARV being lower, your after repair values being lower, or you're looking to add extra buffer onto your renovations, anything you can to make sure you have a little bit more room that you wanna make sure that you're not caught with your pants down if things do start to go sideways really quick. Additionally, try to make sure you have multiple exit property sorry, multiple exit strategies on your properties. So if you're going to buy something, say to fix and flip, it probably isn't a bad idea to also make sure you can turn it into a rental if you need to, you don't lose it all things go sideways. Because if you buy a property to flip it, all of a sudden, you're in a situation where you can't flip it and make it profitable, you're able to refinance your money out and turn it into a rental and just hold on there for a little bit, then you'll be okay. Right? Or likewise, if you get a property and you try to wholesale it, or you're trying to, you're planning to flip it, but then you decide they don't want to flip, you don't have the means to do the renovation, but you can wholesale it. You just want to make sure that you have options either way. And just don't be afraid to pivot on deals once things start to look a little bit weird.

Mike DeHaan: [7:16] So anyway, be conservative on your estimates and make sure you have multiple access strategies. Number four, I would say to be patient with your opportunities more so than ever. So over the last couple of years, people have been jumping at things pretty aggressively, just because opportunities have been fewer and farther between. Now I would say you don't need to do that. And not only do you not have to jump at things quite as aggressively, and you can wait for stuff that fits your buy box. But if you're working with a wholesaler or realtors, working with retail sellers, things like that, don't be afraid to negotiate. Right? And on those negotiations, if they're not going as quickly or they're not as responsive as you think, be patient there as well and be willing to wait out and hold your line on your offers, right? Whether that's with sellers, wholesalers, realtors, whatever. Because that patience is really going to go further than you think right now as there's gonna be less and less players in the field. If you engage with people and you sort of give them that option and you wait for the best opportunities for you, worst case, you miss out on a deal, that's fine. But best case, you're gonna be still getting opportunities, but they're just gonna be ones that you're actually excited about. And you shouldn't feel as rushed to get stuff right now just because there is gonna be less less stuff available. So we want to be patient and don't be jumping into any deals that you're not super certain about. So the last thing, and then this is kind of the most important and one of the ones that will be the toughest for new people is don't whatever you do, do not sit on the sideline and do nothing.

Mike DeHaan: [8:49] We've known several people that were newer investors kind of going into the end of twenty twenty one, who maybe had done one or two properties or hadn't jumped in any properties yet. Now, things have started to get weird. And okay, I'm done. I'm getting out of real estate. That's probably the worst thing you could do if you're serious about wanting to grow wealth, and you're serious about wanting to be a real estate investor. I know things are less comfortable than they were initially when when people got in, especially over the last couple of years, but there's always things you can be doing to grow your business. Whether that is all the things I talked about growing your network, getting liquid, building your war chest, all that sort of stuff will just get you towards that end goal that we all have of financial freedom and building wealth through these assets. Right? So even though it can get scary, do not just sit on the sideline and wait for things to turn around again. Because I tell you what, as a newer investor, if you were waiting, by the time you realize things have turned, if you're not involved in the community, you're not doing all these things to grow, you won't realize it until it's already on the up and up again.

Mike DeHaan: [9:51] You're gonna be exactly where you were when you started this last time where it's things have already taken off and and you're not trying to play catch up. So whatever you do, do not sit on the sideline. Do nothing. Anyway, those are my five things. So I guess just to reiterate the five suggestions I would have for people that are looking to start investing or to grow their investing during a recession. One, to focus on networking, particularly finding those key players. Two, be smart with your finances and get as liquid as possible. Build that war chest. Three, be extra conservative with your estimates, right, both on a sales price and on your renovations. And along with that to make sure you have multiple access strategies. Four, be patient with your opportunities. If there's stuff that you're really not excited about, don't feel like you need to jump after it and just try to figure something out. It is not the time to be taking risks like that. And five, no matter what you do, don't sit on the sidelines and do nothing. Anyway, thanks so much for listening, guys. Hopefully, you enjoyed this first, what should I call it, Focus Friday episode. Seriously, if you have any good names, go ahead and send me a DM on Instagram. I'm on Instagram at Mike underscore Invest. And if you want to learn about real estate investing, or you want to know how we've built our business and how we're going to be continuing to build our business during the recession, go ahead and hit me up on Instagram at Mike underscore invest, or you can go to the instantinvestorprogram.com and see if you would be a good fit for our group coaching programs, a little link to book a call with me on there. So hopefully speak to you guys soon, and thanks for listening.