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How To Prepare For The Next Real Estate Downturn

If house B ends up being better (as in, you bought it after the market crashed and paid less), your opportunity cost would be the money you lost that you could have made if you’d waited for house B. When you BRRRR correctly, you can end up buying an investment property with zero money down. When you buy a house traditionally, you put a hefty down payment down, then include money for closing costs and the rehab. In this case, if the market crashes, you don’t have that 50k to invest in the down market, so your opportunity cost is high. This is the reasoning behind the “fear of missing out” that keeps investors from getting started investing in real estate. If you can buy a property and recover the capital you used to buy it, what stops you from buying the next one too? In a hypothetical BRRRR deal, you would buy a fixer upper property for 60k that needs 40k of rehab work. This means you’ll have all that money to put into the next house when the market crashes. If you do this effectively, you can pull out even more money than you put in (by buying great deals and rehabbing prudently), growing your capital and the ability to invest in future properties. How do I know which market to invest in?