How to Invest in Real Estate During a Recession (2025 Update)

Dave:
This is recession proof investing 1 0 1. There are a lot of economic indicators right now that are pointing towards a US recession, so there’s a pretty good chance that we’re in for some level of economic pain in the coming months or years, and unfortunately, there’s just nothing you or I or any individual person can do about those big picture trends, but there are absolutely moves that you can make right now to protect your investments from the worst case scenarios of recession. And yeah, you could even profit during an economic downturn if you know what to do. These types of individual level changes or pivots are totally within your control, and today we’re going to teach you how to do it.
Hey everyone. I’m Dave Meyer, head of Real Estate Investing at BiggerPockets, where we teach you how to pursue financial freedom through real estate. Today we’re talking about recession proof investing. So I had to bring on the guy who literally wrote an entire book about that topic. Jay Scott. On this podcast, Jay and I are going to get into a lot, but we’re going to focus on the moves that real estate investors can start making today to ensure that their assets are protected during recession. And of course, it’s great to stack cash now if you can, but we’re also going to talk about what you could do with your outstanding loans that you may have, and we’ll also talk about the potential opportunities that come during recessions because you can buy great properties at great values during a down cycle if you know where to look, if you know what strategies to consider and how to analyze the risks. Personally, I don’t think it’s really the right time to take big swings on some fringe vacation markets or really high price flips, but there are still great ways to invest. Those are just a couple of examples of the great advice Jay dishes out all throughout this episode. There’s so much more that almost anyone can learn about how to survive if there are difficult investing times ahead. So let’s get into it. Jay Scott, welcome back to the BiggerPockets podcast. Thanks for being here.

J Scott:
Hey, thrilled to be here. It feels like a long time since I’ve been on this show. I keep going on the market. Glad to be back on this one.

Dave:
I know well on that show we’re always talking about economics and you’re so good at that, but you’re also great at talking about real estate, so this is a fun one. Actually. Today we’ll be in sort of the intersection of those two topics, which is probably most relevant to our audience. So Jay, you, for everyone who doesn’t know, Jay wrote a book called Recession Proof Real Estate Investing. It’s a great book. I have read it probably two or three times. It’s just a really good hands-on guide. If you are sitting there watching the news going on social media, seeing all this buzz about a recession, you’re wondering what does that mean for real estate? Jay has put it in a book and we’re going to pick his brain about it here today. Jay, maybe you could just start by giving us a framework on how do you think about the business cycle and what real estate tactics, what strategies work at different times?

J Scott:
Yeah, so when we talk about the business cycle, we’re basically referring to the fact that the economy, the broader economy works in cycles. It goes up, it goes down. A lot of people don’t realize this, especially if you’re under 35. The last time you experienced a real recession was probably 2008, which was what, 17, 18 years ago? So you probably don’t remember the recession before that. So in your life it’s basically there’s been one recession. But the reality is if you go back throughout history, the last 150, 160 years, what you find is we average recessions every four to five years. We’ve had 36 recessions in the last 160 years, and so it hasn’t been that way the last 10 or 15 years, but prior to that, recessions were actually pretty common. And if you’re old like I am, if you grew up in the seventies and the eighties, I remember seeing four recessions in the first 15 years of my life because they just happened a lot more often
And they weren’t 2008 type events, they weren’t fun. I remember my parents, my stepfather’s business going under during at least one of those. I remember my mom losing her job during at least one of those. And so it’s not fun. People lose their jobs, they lose their houses, they have to declare bankruptcy, but it’s again, not a 2008 type event where it is so pervasive that it impacts everybody in really horrible ways. And generally speaking, we don’t see real estate get hit by recessions the way we did in 2008. Again, 2008 was an anomalous event in most recessions. Real estates actually done pretty well. You take 2008, real estate was down something like 21% single family market. Go back to the Great Depression real estate was down double digit percentage as well. Of the other 34 recessions that we’ve seen over the past 160 years, real estate has never dropped more than one or 2%.
And so even if we do see this part of the economic cycle called the recession in the near future doesn’t necessarily mean that real estate’s going to follow suit and do poorly. That said, there are some things that we want to think about when we talk about the business cycle. I think of the business cycle in four pieces. It’s basically you have the expansion phase, which is when the market’s hot and everything’s going well. That’s what we saw I think 2013 through about 2020. Then we kind of level off at the top and we kind of plateau at what I refer to as the peak, and this is where we’re transitioning from the market going up to the market, softening and starting back down into a recession period. That’s where we could be today. We were starting to see that in 2019 before covid hit potentially, and I think we’re potentially seeing that again today.
Then as we kind of trail off, we see the recession phase where the economy just kind of trails down. Things are bad. Again, people are losing their jobs and interest rates are going down, but nobody can borrow money because they don’t have as much money, they don’t have savings, et cetera, et cetera. Then we get down to the bottom part and it all starts over again. We hit bottom and we start again into a recovery phase and again into the expansion. And so those are kind of the four phases I think about if you want to think about it in those terms right now, we very well could be in that peak phase where we’re getting ready to head potentially downwards. And when you head downwards, a couple things are going to happen. Historically, we see interest rates go down. So when we’re in a recession, the Fed doesn’t want us to be in a recession.
They want the economy to be booming, and so they lower interest rates, which in theory should spur the economy. So one of the things that we could see if we’re heading towards a recession is a drop in interest rates. That said, one of the other things that impacts interest rates is inflation. And when we see high inflation, the Fed has to raise interest rates to fight that inflation. And so we had these competing forces that the Fed has to deal with potentially inflation, potentially recession. And so we may or may not see interest rates move during the next 3, 6, 12 months. So we could see lower interest rates, we could see lower mortgage rates, but we might not.
And so we have to be basically making the decisions that we’re going to make for our business not knowing exactly what’s going to happen with interest rates. If we know interest rates are getting ready to go down, it makes a lot of the decisions that we need to make in the near future a lot easier, but we don’t know that. So let me start with number one thing I like to do if I think that we’re in potentially heading towards a recession, remember, cash is king and cash is that thing that’s going to keep you out of trouble, and it’s also going to give you the ability to jump on good deals if they should come along during this more distressed period. And so the first thing I like to tell people if you think we’re going into a recession is save up as much cash as you can possibly save up. Get as liquid as you can. I know a lot of people keep a lot of money in long-term real estate where it’s not highly liquid, but remember if we head into a recession phase, you may not be able to sell properties for a while.
Your cashflow may drop if rents go down or your vacancy goes up or whatever happens. And so having access to cash is probably the single most important thing that I would suggest that people do if you think we’re heading towards a recessionary period.

Dave:
That’s a great point and that sounds a little bit easier said than done, especially if you own real estate. Are you saying liquidate sell properties or how do you go about it at least?

J Scott:
So there are a couple things. One, it doesn’t necessarily have to be cash in the bank. One of the other things I recommend along with having cash is having lines of credit now is a perfect time, especially at this point in the cycle. Typically credit is pretty readily available
Once we get into a recession, one of the things that we see happen, people always assume that, Hey, if we have a big recession and real estate values drop a lot, I’m going to start buying lots of property. I’m just going to buy everything up. What we learned back in 2008 while good in theory, the reality is banks stop lending during a recession. Credit gets a whole lot tighter. It’s hard to get lines of credit, it’s hard to get mortgages, it’s hard to get credit cards and other types of loans. And so what I recommend is that people get access to credit. Now, as much as possible, you have equity in your primary residence, go get a heloc. Doesn’t mean you have to take the money out right now, but apply for a line of credit that you can borrow against should you need that money. You have rental properties that have equity in them, you can do the same thing, increase your credit card limit. So again, I’m not saying go out and spend more money than you have, but at least have access to that capital if you need it. So there are lots of ways to increase your credit, and that’s almost as good as having cash.

Dave:
That makes a lot of sense to me. I’m actually thinking about doing that. I have a couple of properties, I have a bunch of equity in that the LTV is really low, and so I could sell them, I could refinance them, I could get a line of credit against them. What would you do with a property like that?

J Scott:
Yeah, so let’s start with those options. So the first one you mentioned you could sell ’em. What I recommend again at this point in the cycle is if things get bad, if things start to go downhill, value start to drop, it could be a year or two or three before you can realistically sell your property again for what you want to sell it for. So what I typically tell people is make a decision right now. Don’t say, Hey, I may sell my property in six months or 12 months. Make a decision right now. I’m going to hold this property for at least the next three to five years, which would get you through what most recessions are. Most recessions last 12 to 18 months. So it would get you through the recession or decide you’re going to sell it. Now, don’t be wishy-washy about it.
And so when should you consider selling a property? One if that property isn’t throwing off much cashflow, keep in mind during a recession, it’s very realistic that we see rents become a lot flatter. So basically we don’t see rental growth. We may even see rents go down a little bit. And it’s also very probable in most cases when you have a recession that vacancies start to go up. Remember, people are losing their jobs, they’re getting their hours cut, they’re forced to move for some reason. And so we tend to see vacancies go up and between rents dropping and vacancies going up, we tend to see cashflow drop. If you have a property that’s barely cashflow positive, it’s very possible that an upcoming recession could make it a cashflow negative property. And so it’s much better to have that property off your plate, not putting you in a position where you have to find money every month to keep it going as opposed to just holding onto it and regretting that in a year or two. So if you have a property that’s barely cashflow positive, you don’t have a lot of reserves, you’re not interested in holding it, if it were cashflow negative, that’s a great candidate to sell
Right now.

Dave:
Yeah, I think that’s a good way to put it. Maybe I won’t earn as good of a return on that cash for six months or 12 months, but I personally think there’s going to be deals coming. We’ll see about residential. I think in multifamily, there’s definitely going to be deals coming in the next couple of months. So maybe you just let it sit in a money market account for a couple months and wait and see what happens because the upside on some of these deals over the next year might be going down a little bit and you might want to sort of reset and find new properties that have some fresh upside that you can enjoy in this next sort of part of the cycle that we’re going into.

J Scott:
And let me be clear, I’m not suggesting to anybody that you should try to time the market that you should be selling your property simply because you think we’ve hit a peak and values are going to go down in six months and then you can buy stuff cheaply. So I’m not recommending anybody do that. All I’m saying is that there is a chance values could go down, and if you don’t want to hold a property long-term because it’s not profitable enough, it’s not generating enough cashflow, now may be a good time to sell it. So I’m not saying to time the market necessarily, I’m just saying to mitigate your personal risk by not holding properties that would be in a bad situation if rents were to drop or vacancies were to go up.

Dave:
So we do have to take one quick break, but we’ll have more with Jay Scott right after this. This week’s bigger news is brought to you by the Fundrise Flagship Fund, invest in private market real estate with the Fundrise Flagship fund. Check out fundrise.com/pockets to learn more. Welcome back to the BiggerPockets podcast. I’m here with Jay Scott talking about recession proof real estate investing. Jay, what’s the next thing you think the audience here should be thinking about?

J Scott:
Yeah, so we actually mentioned the first couple of things that we’re thinking. So number one, have cash and available credit. Number two, sell any properties that you think have cashflow risk, now is a good time to get out from under those troublesome properties that you’re not going to want to hold for the next 3, 5, 7 years. My general rule of thumb is if I don’t see myself holding it for five years, I might as well sell it today because this could be the best opportunity I have in the next five years. So that’s number two. And then number three I would say be very particular about location. Keep in mind that there are three things for the most part that drive real estate values. That’s population growth, employment growth and wage growth. So locations that are seeing people moving into it, locations that are seeing businesses move in and locations that are seeing wages go up, those are the places where real estate tends to follow because remember, more people moving in, those are your customers.
More customers means it’s more demand, more businesses moving in. They hire people, again, more customers, and when wages go up, you can raise your rents because people have more money to spend. So population growth, employment growth and wage growth, focus on those. Find areas where people are moving, where businesses are moving, that’s where you want to be investing, especially during times like this, because again, we don’t normally see rents go down. We don’t normally see vacancies go up, but during recessionary periods we may and it’s going to happen in places where we’re seeing the least growth. So that’s the next thing along with that, and this is one we don’t talk about enough. Everybody’s heard if you’ve done buy and hold, you probably heard the whole population growth, employment growth, wage growth, but I would add a fourth one to that list I think is really important. And we learned this lesson in 2008, employment diversity,

Dave:
Make

J Scott:
Sure you’re investing in a place that doesn’t have a whole lot of risk on a single business or a single industry or a single economic sector. Again, we learned this in 2008. If you were investing in let’s say Las Vegas, Nevada in 2008, you got crushed.

Dave:
I always pick Vegas to make fun of that for this not make fun of, I’m sorry, but it is just such a prototypical example.

J Scott:
It is the one major industry in Las Vegas is tourism, it’s casinos. And during 2008, people didn’t have the money. They weren’t traveling, they weren’t going and staying in luxury hotels and Vegas got crushed. And if you think to yourself what other locations in the country are purely based on tourism, you’ll find a similar pattern. Orlando, where we have Disney World, Orlando got crushed in 2008. LA got hit pretty hard in 2008 because it’s a high tourist destination. Other places that are high tourist destinations got hit hard.

Dave:
Or like Detroit, right in 2008. Yeah, automotive.

J Scott:
Yep. I was going to say in the nineties, Detroit in the nineties got absolutely crushed because the automotive industry got crushed and there was no other industry for Detroit to fall back on, and it’s taken them 30 years to really start to recover. And so I always say focus on employment diversity. Find areas where you have lots of different industries, lots of different sectors, and certainly stay away from areas that have a single large employer. Again, Disney World’s a big example. Detroit’s a huge example. You probably didn’t want to invest in Seattle. I know you live in Seattle now, but back when it was just Microsoft in Seattle, no, not at all. Yeah, it was a big risk. And so yeah, employment diversity is the next big one if you’re looking for good places to invest,

Dave:
That is very good advice. And so it sounds like you’re saying thinking about location not just within your city, but even considering what markets and where you’re placing your money right now, taking that big step back and sort of examining the macro again, even in if it’s a market that you already invest in.

J Scott:
And one of the things that we see when you’re looking a little bit more either, well it could be macro or micro, is we tend to see that larger cities tend to do better than secondary or tertiary markets during recessions. People tend to move from small markets to larger markets where the jobs are. And so if you’re investing in a small town, you’re on the path to progress or you think you’re on the path to progress, you think in five years the city’s going to expand and this is going to be a huge area that may happen. But if we end up in a recession, that path of progress may stall and it can stall for years at a time. I was investing in Atlanta during 2008, and there were a lot of areas to the west side of Atlanta and to the east side of Atlanta where the city had been sprawling for the previous decade. There was a lot of buildings starting up. It was very much path of progress that all shut down in 2008. It took five or six years before that progress started to pick up again because everybody moved back into the city because that’s where the jobs were.
And so another thing to keep in mind that if you’re in a large city or even a medium-sized city and you’re thinking about going out to the outskirts, the path of progress, just keep in mind you probably have more risk there than you do in the city proper.

Dave:
That for me in Denver has already happened in the last two or three years I think because of the supply issue we’ve talked about on the show in a lot of places. But we already start to see places stall out even before there’s a recession based on just individual dynamics because Denver had this crazy growth and it’s slowed down and it’s still a great place to invest and it’s still a great market, but city by city, you’re going to start seeing this I think in more places and that’s normal. In normal times, individual markets are in different parts of their own cycle. And so while we’re talking about this with Jay here in this broad national sense as he’s talking about, each individual market is also going to have its own dynamics that you need to research and consider and think through before you make any investments or potentially think about selling some of your investments.

Dave:
Yeah.

Dave:
So Jay, I’m not going to ask you to say if we’re going to recession or not. We’ve talked about how hard that is, but let’s just say we do. How do you think this plays out and what are some of the moves for investors beyond just thinking about stacking cash, thinking about location, what kind of deals do you think are going to make

J Scott:
Sense? So let’s split this up. There are probably a lot of buy and hold investors out there, and there are probably some transactional or flipping investors out there. Let’s start with the buy and hold. So on the buy and hold side, number one, I’m a big fan of make sure you’re getting cashflow. There’s always this debate of should I be buying for cashflow or appreciation? I think it’s pretty obvious that when we’re heading into a recessionary period, when the market’s going downwards, cashflow is better than appreciation because we’re probably not going to see appreciation for a little while. If you’re an appreciation investor, wait a year or two and maybe you’ll have some great deals, but if you’re heading into the recession, you want to make sure you’re generating that cashflow. Be conservative when doing your numbers, when running your numbers, underwriting your deals, assume that whatever the rents are today, they may go down five or 10%, assume whatever the vacancy is today may go up five or 10% if the numbers still work.
If you’re still generating cashflow with lower rents and higher vacancy, then it’s probably a good deal and there’s no reason not to buy it because remember, over any 10 year period in this country, real estate has only gone up in value. And so if you can hold on for a couple years with that lower rent and that higher vacancy, you’re probably going to find that it was a great deal. So be more conservative, focus on cashflow, but that’s the first piece of advice. Next, if you currently own rental real estate, make sure you don’t have any loans coming due in the next year or two. I mentioned this earlier, but one of the things you don’t realize unless until you’ve gone through it is that during a recession, lending can really tighten up. It can be very difficult to refinance. It can be really difficult to get new loans even if interest rates are low.
That was the crazy thing in 2008. We had low interest rates, we had lots of great deals, but it was really difficult to get a loan. So if you’re going to be in a position where you have to refinance in the next year or two, now is probably a good time to do it, even if interest rates are a little bit higher than you’d like them to be, even if you have to refinance into a higher interest rate loan than what you originally had, it’s better to refinance now and not have to stress over it for the next year or two. If lending tightens. Next, make sure you’re doing a really good job of screening your tenants.
What you’ll find is that during a recession, you’re going to have a lot more turnover. And this is pretty common sense. People are losing their jobs, they’re getting their hours cut, they’re getting their wages cut, they have to move, and so you’re going to have a lot more turnover. You want to make sure that the tenants that you have in your units are top notch. You want to make sure the tenants have the right mentality, that mentality that I’m going to do whatever I can to pay my rent. And so make sure you’re screening your tenants more carefully than you do during other parts of the cycle. Also, if you lose a tenant, not only do you want better tenants because there’s less likelihood that you’re going to lose them if you do lose them, it’s going to be much harder to find a new tenant if we’re in a recession. So screen your tenants more carefully. Next thing I would say, do your best to retain the good tenants. That seems

Dave:
So, yeah, absolutely.

J Scott:
During this time period for the last six or 12 months, I haven’t raised rents same. I’ve had some room where I could, but I wanted to build that goodwill with my tenants because when their time comes where they do have more choices, where they do have other options because there’s lots of vacant houses or vacant apartments, I want them to remember that I treated them well and hopefully they’ll decide to stick with me. And then last thing I’ll say for buy and hold. If you’re buying new rental properties and you’re getting loans, do your best to avoid over-leveraging.

Dave:
One

J Scott:
Of the big problems that we saw in 2008, it wasn’t so much that values went down, I mean they did go down, but values going down are only a problem when values are now lower than the equity that you have in the property. If you think values could realistically drop 20%, and I don’t think we’re going to see a 20% drop in real estate values, but if you think realistically, a worst case scenario is that we could see 20% drop in real estate values, as long as you’re getting loans at 80% loan to value or less, you don’t ever have to worry about being underwater. So definitely keep in mind your loan to value is bring as much cash to the table as you can. I know that contradicts the hold as much cash as you possibly can, but low leverage is definitely going to put you in a safer position than high leverage.

Dave:
Well, yeah, it’s not necessarily contradictory, right? Because if you’re saying hold cash to buy deals, then when you buy the deal, maybe don’t go max leverage and use that cash that you stockpiled intentionally to make sure that deal is extra safe and extra secure. And then maybe when the market conditions you’re feeling a little more comfortable, you can refinance it, you can take out a heloc, you can do something to extract that cash back out of it. Alright, Jay, so you talked about buy and hold. We want to hear your takes on transactional real estate, what they should do, but we do have to take one more quick break. We’ll be right back. Welcome back to the BiggerPockets podcast here with Jay Scott talking about what to do if there is a recession. We’ve talked about the buy and hold side. Let’s talk about the transactional side, which is more like flipping houses, value add, that kind of thing. What’s your take there?

J Scott:
Yeah, so I lived through this. I was flipping a lot of houses back in 2008, 9, 10, 11, and I learned some good lessons and some hard lessons. Hopefully other people don’t have to learn the same lessons, but number one, I would recommend for the most part, staying away from niche properties, don’t buy those properties that are going to have a real small buyer pool. Don’t buy the $5 million luxury house in a neighborhood where nothing is worth more than a million dollars. Don’t buy that property that’s on a busy street because it happens to be in a good school district. Focus on the properties that are going to have the largest buyer pool. Basically your bread and butter, average market value in your average neighborhood, average everything because that’s where you’re going to have the most buyers. And if we head into a recession, you’re going to have a whole lot fewer buyers than you would expect, and you want your property to appeal to the largest range of buyers as possible. So stay away from niche properties. Number two, move quickly. I know a lot of people that buy flips and they say, ah, I’m going to buy a couple flips. I don’t have time to do ’em all at once, but I found three great deals. I’ll do one, the other two will sit as soon as I finish one. I’ll do the next one and then I’ll do the next one. Don’t buy more properties than you can work on in a given time.

Dave:
Is that ever a good plan?

J Scott:
Well, it can be. I mean, realistically, again, from 2013 to 2021 values only went up. So if I bought a

Dave:
Property

J Scott:
And I couldn’t work on it for six months, by the time I did start working on it, the value probably went up without me having to do anything.

Dave:
And the appreciation would offset the holding costs essentially.

J Scott:
I mean, in a lot of cases with flipping for much of the last 10 years, you can make mistakes all along the way and still make money. That’s not the case anymore. And so you want to move quickly. You don’t want to have projects sitting because if for some reason the market does start to turn, you want to make sure that you have product ready to sell as quickly as possible. Along with that, if you start to see the market turn, it may be better. Always consider selling even if you have to take a small loss, even if you, you’re taking medium-sized loss, even if you have a property that’s not fully renovated, if you can get rid of it and reduce your risk by not holding it during a down cycle, it might be the better choice. We have a saying in poker that it’s not so much how much money you make on a hand, but you’re going to lose most hands. It’s how to lose the least amount of money

Dave:
In

J Scott:
A bad hand. And if you’re dealt a bad hand when flipping houses, figure out how to lose the least amount of money and get out as quickly as possible. And then this is probably the most important thing, don’t go into any deal without multiple exit strategies. If you’re going to buy a flip, great, buy a flip. That’s not a bad time to flip houses, but make sure you have a backup plan. If it becomes a bad time to flip houses, if the market starts to turn, can you wholesale that property to another investor that they can then hold it for rent? Or can you hold it for rent or can you lease option

Dave:
It

J Scott:
Or can you do something else with it that will allow you to generate some cash flow or allow you not to lose the property during the time that we’re in a bad part of the economic cycle. So always have a plan B, a plan C, a plan D if the flip doesn’t work out because the economy doesn’t work in our favor.

Dave:
So let’s run through an example of a flip, right? You’re going to buy something, you start to see it, the market turn and you got a couple months left, right? You’re halfway through a renovation days on market are starting to go up. You’re seeing just signs of weakness. What’s your next move?

J Scott:
Well, the first thing I’m going to ask myself is realistically, how long can I hold this property? Can I turn it into a rental and hold it for the next five years? Can I do something else to generate cashflow from this property so that I can hold it through whatever’s coming up, whatever bad economic situation’s coming up? If the answer’s no, then we’re going to want to move quickly because remember, there are other people out there that are doing the same exact thing you are. And so you’re going to have a lot of inventory start to hit the market all at the same time. And it’s not just flippers. There are homeowners out there, people that are moving because they have a job offer in another state or they’re moving because they’re just trying to get to someplace else they want to live. And if they see the market start to soften, they’re going to list their houses more quickly.
They’re going to drop their prices quickly to get them sold quickly. And so you’re going to start to see a lot more competition once the market starts to soften. When that happens, you’re going to want to be ahead of the competition, which means you got to move quickly. You’ve got to be able to figure out what’s your bottom number, what’s the lowest price you can sell that property for? And instead of saying, well, here’s my wish number, I’m going to list it here. If I can’t sell it here and two weeks I’ll lower the price and two weeks later I’ll lower the price again and again, you’re basically, you’re catching a falling knife and you don’t want to do that. Pick your bottom price, put it out there and get rid of the property Quickly,

Dave:
You mentioned it’s still a good time to flip. I am in the middle of my first real flip. It’s going pretty well, so I think it’s going to work out, but it’s a higher dollar point flip to the point where if I had to hold onto it, I would lose money. It’s just the rent would not be able to cover the carrying costs. Would you recommend then it’s almost like flipping at a lower dollar cost because that’s more likely to be able to cashflow if you weren’t able to sell off the property when you thought

J Scott:
A hundred percent. That’s another big reason for when you’re looking to flip in a market like this that could change go after the average property. And when I say average, another thing about average is median value. Median value properties tend to rent the most quickly and even lower the median value because we’re going to tend to see better cashflow numbers in lower price houses. So yeah, there’s definitely a good reason if you’re going to flip houses in this market, flip it, medium home value, buy and expect to sell at the median home value or below, not above.

Dave:
Got it. All right. Well, you’ve talked us through the buy and hold approach and the transactional approach. Before we get out of here, is there any other advice you think the audience should know about how to handle a potential recession?

J Scott:
Yeah. One of the big things I’ll say is that, again, anybody that was doing this during 2000 8, 9, 10 knows that it’s really easy to sit here before the recession or before a recession and say, Hey, if there’s opportunities, I’m going to start buying up lots of property. But what we all realize if we’ve lived through 2008 is it becomes a scary time, and it never feels like the bottom. It always feels like things are going to get worse, and it always feels like this is never going to get better. And so what I recommend is that people think about their strategy before things get bad, because it can be really easy when you’re in the midst of it to basically second guess what you thought your strategy was going to be. Write down what your criteria is. I need this much cashflow. I need a property in this price range with this much leverage at this interest rate. Write those things down and follow the rules that you write down now as opposed to making up the rules when you’re in the middle of it, because we make bad decisions when we’re under stress, when the economy is bad,
When there’s a lot of change happening around us. So it’s just like any negotiation. You want to write down your parameters upfront, what you’re willing to give in on what you’re looking for, because when you’re in the middle of that stressful situation, it’s really easy to lose sight of the goal. And so write it down now so that if we do end up in a recession and you’re looking for deals or you have deals that you need to get rid of, you have a game plan written down so you’re not making tough decisions under stress.

Dave:
That’s a great piece of advice. And I was not an active investor when 2008 happened. I started in 2010, but people thought I was crazy. In retrospect. Now people are always like, oh, what a great time to buy. And yeah, it’s super easy to say that, but that was three years before the bottom. Things kept going down. Before that people thought you were crazy. But if you understand sort of the fundamentals of it, you can hopefully come up with a game plan that works for you like Jay said, and that’s why it’s helpful to not just follow the media or casual home buyers, but talk to other investors, whether it’s on BiggerPockets or listening to this podcast or Jay’s podcast, just hear what other people are doing. And it’s sort of gain some confidence or at least some knowledge about how other investors are treating these things because those headlines you see about the housing market or recessions, they don’t necessarily apply in the same way that what Jay is talking about sort of applies to our specific industry. So Jay, thank you so much for being here. We appreciate it.

J Scott:
Absolutely. And last thing I’ll say is just because we are talking about what to do during a recession doesn’t mean that I necessarily think that we are heading towards a bad time in real estate. We’ve talked about this on the other show, Dave, that I actually think real estate is well positioned right now, but it’s always good to be prepared and we never know what might happen.

Dave:
Yeah, exactly. And just because you came on the show, everything’s going to get better. We already talked about this, so there’s nothing to worry about. We just have to go through the motions of talking about it so that things get better. There you go. All right, thanks again, Jay. And thank you all so much for listening to this episode of the BiggerPockets Podcast. We’ll see you next time.