How to Profit From a Recession
TL;DR - During a recession, real estate investors can capitalize on cheaper housing prices, distressed sellers, and high renter competition to build their real estate empire.
In June, housing markets around the country hit all-time highs.
Since then, they’ve come down month over month.
While this is relatively normal, it’s one sign that we’re overdue for a market correction.
If one were to happen, people would get scared. Most people.
But real estate investors see opportunities where others see caution tape.
And if you step up to the plate during a recession, you could win big.
The only thing you need to know is how.
How to Profit From a Recession
Take Advantage of Opportunities
Real estate prices dip during a recession. This creates tons of opportunities for investors to take advantage of.
Homes on the market become more affordable because the demand isn’t high. Which means investors can often buy real estate in desirable areas at a fraction of the cost.
In addition, real estate investors can capitalize on distressed sellers. These are home sellers that want to get rid of their property ASAP for whatever reason.
Reaching a deal with a distressed seller can net you a large discount.
And because home demand shrinks up during a recession, distressed sellers will become more and more common.
Not to mention…
Fewer people are becoming homeowners during a recession. That means they’ll stay or become renters.
Which leads to landlords being able to charge a premium for rent.
Since more people are looking for a place to rent, there will be more competition for your unit.
You might even have to start a bidding war between all your prospective tenants until the highest rent is left!
All this is to say…
During a recession, real estate investors can capitalize on:
Cheaper housing prices
Distressed sellers
High renter competition
To build their real estate empire.
How Do You Do It?
You need to plan ahead if you want to invest in real estate during a recession.
Because investing in real estate during a recession isn’t solely about taking advantage of the low prices or distressed sellers.
It’s also about being prepared and disciplined throughout the process.
A General Plan of Action
Here’s a general plan that’s good to follow.
Get Capital/Financing
First, make sure you have enough capital or financing to invest in real estate.
The amount of capital you need depends on whether you’re buying a single-family property or something larger.
Stuff like:
Duplexes
Triplexes
Larger complexes
Find Your Market
Once you have your capital ready to go, it’s time to look for real estate opportunities.
Focus on housing markets that are likely to stay in demand during a recession. Two examples would be suburbs and college towns.
These hotspots are no-brainers regarding real estate investment opportunities.
Look for Deals
Next, research potential real estate listings. Then visit them to get a real sense of what’s out there.
When it comes time to make an offer, make sure you know what comparable properties in the area are selling for.
And don’t be afraid to negotiate with sellers!
Close a Deal
Speaking of negotiating — study, practice, and get good at it!
To get the best possible deal, you’ll need to negotiate with the seller of the property.
If the seller is distressed, negotiating will be a bit easier.
But prepare for it and close on the property you want!
Do Due Diligence
You don’t want to invest in a property that has termites in every wall, rats running around freely, and the roof caving in.
So scope out the place!
Hire professionals to check out your potential property. They help you decide if a home is worth what you’re paying for it. Or if you should stay away!
Paperwork Time!
Once you’ve found a real estate opportunity that fits within your budget, meets your criteria, and has been checked out by professionals…
It’s time to get the paperwork in order and obtain ownership.
Real estate contracts
Financing documents
Insurance policies
Make sure everything is taken care of properly before closing on the deal.
Paperwork is the worst part of a real estate deal. It will take time and probably be boring.
But you’re almost there!
Read everything carefully and consult your lawyer if you have one.
Once you finish all the legal documents, you’re ready to get the keys and make some cash flow!
Here are some additional tips.
Learn real estate jargon
Cash flow, cap rates, ROI, etc.
Begin building a real estate team
Real estate agents, lawyers, property managers, mortgage brokers, etc.
These are the people who will help you find and close deals
Diversify your real estate portfolio
Don’t put all your eggs in one basket
If you follow these tips, you can come out ahead and make a profit during a recession!
Prepare for Market Corrections
Before getting started, it’s important to understand how real estate markets work.
Real estate market corrections are caused by a combination of factors such as:
Inflation
Population shifts
Mortgage rates
Each real estate market is different. So it’s critical to do research and find out if any underlying issues could cause real estate prices to start falling.
Make sure to diversify your real estate portfolio to minimize risk.
Investing in a variety of real estate types and locations can help you spread out risk and stay profitable.
And also — have a plan for managing cash flow during market corrections.
This means having adequate reserves and other sources of income. Just in case your investments aren’t as profitable during a housing correction.
While your rentals should be generating strong cash flow, it doesn’t hurt to have a backup plan.
Finally…
Know that if you put in the work, you’ll reap the rewards.
Wishing you the best and…
Happy Hunting!
How We Can Help You
Does investing in real estate sound intriguing to you? Would you like to learn more? We’d love to be of value!
At Undoor, we pride ourselves on teaching new and experienced investors how to maximize their gains with minimal stress. Our goal is to help you fall in love with real estate and real estate investing!
Do you want to get key insights and advice that’ll help you get ahead of the game? Don’t hesitate to contact us for any and all real estate wants or needs.
