Monday, January 4, 2016

The Coming Crash

When a bubble pop is coming, it doesn't mean you have to stop flipping. When I analyze deals, I always have my 2008 lenses on. I was flipping through 2008 and so I remember exactly what investments did well and which ones did poorly.
1) Generally, cash flow properties will do okay. Fix to rent (BRRRR). The bottom end of the rental did fine during 2008 to 2010. If you bought a property under $100 k in the Seattle area, it was barely affected 2008 to 2010.
2) The hot areas do well. In my market seattle, areas like Ballard, Fremont, Greenlake, Madison Park, Magnolia, Queen Anne, Wallingford, Laurelhurst, Sandpoint, Bellevue, Mercer Island, Medina, Kirkland and Redmond all did okay during 2008 through 2010.
3) Watch out for the middle markets. Those between hot and bottom prices. In my market, middle markets include Puyallup, Renton, Auburn, Federal Way, West Seattle, Burien, Lake Stevens, and Bonney Lake got crushed in 2008.
4) Be careful with Apartment and condo projects during the bubble peak. I have 5 projects and am limiting myself to two. Be able to have cash to ride out the bubble crash.
5) Be careful with bank loans and cross-collateralization. Don't let one bad project affect all of your otherwise well-positioned other assets. Better to rely on hard money and private money.
6) Buy gold and bury it. I wish I were kidding!
7) Partner up with a hedge fund or start a hard money fund. Will keep you liquid during a bubble crash.
8) Keep lots of liquid assets. I utilize cash value life insurance but won't go into that since some of year cringe at the idea because they are not educated. Also, I buy tax liens.
9) Stay away from long plat developments.
10) Pay-down your debts so you have more LTV (I like to be 60% LTV). Just lowers your risk and increases your options. Manage your finances very well.
11) Keep some properties free and clear. Will help.
Happy 2016!!!

Happy Investing!

This  post courtesy of Ryland Taniguchi.

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