Why Investing in Real Estate During a Recession Is a Great Idea
TL;DR - The main benefits are: less demand in the market, more prospective tenants, higher rental income, protection against inflation, and tax benefits.
The real estate market — and the financial market as a whole — is going through some wild times.
Interest rates are changing by the day, housing prices are fluctuating, and many investors need clarification about what to do.
Thankfully, for real estate investors in particular, there’s a solution and it’s not what you might think:
Invest in real estate.
You might be saying, “But that’s just plain dumb!”
Actually, it’s one of the smartest things you can do right now.
Let’s go over why.
Why Investing in Real Estate During a Recession Is a Great Idea
A Recession Seems Near
Over the course of a year, we’ve seen the financial market change drastically…
Specifically within the real estate sector.
This past summer and prior, housing prices were getting outrageous.
Interest rates were at super low levels, causing everyone and their mama to want to buy a new home.
This increased demand by A LOT while supply stayed relatively the same. Naturally, housing prices shot through the roof.
Combined with other factors in the world, this compounded into an inflationary period that’s still going on today.
But now, interest rates are getting hiked up by the Federal Reserve to calm that inflation down — they’re around 7.32% currently.
The result?
There’s a severe decline in the number of people that can afford to buy a new home. Let alone other goods and services.
So it’s all but safe to say that we’re entering a period of recession.
There will be fewer sales of houses, among other assets.
The question is: if things are looking so bleak…
Why would you want to invest in real estate right now?
Why Is It Such a Great Idea?
It's no secret that real estate is a great investment opportunity. But what many people don't know is that this is especially true during a recession.
That's because recessions bring about more supply and less demand, making it the perfect time to invest.
There are also some lesser-known benefits of recession investing that are highly impactful on your cash flow.
Let’s get into them.
Less Demand in the Market
One of the main reasons real estate is such a great investment during a recession is that demand is lower than it normally would be.
People aren’t able to afford the high interest rates that kill inflation. So there are fewer buyers in the market.
This leads to more motivated sellers and therefore…
Allows you to get more for your money and makes it easier to find good deals.
More Prospective Tenants
Fewer people are able to afford new homes during a recession…
Which means there will be more people looking for temporary housing until they can.
So if you’re a real estate investor and have a vacancy during or around a recession, you shouldn’t wait long until you have new tenants.
Moreover, you can be pickier with who your tenants are.
And you’ll be able to raise your rent in tune with the fair market rent of your local area.
Speaking of which…
Higher Rental Income
Cash flow is king baby!
And you’ll be getting a lot of it during a recession.
Because of the influx of people wanting to rent…
The owner of a rental property has supreme leverage.
People need housing and you have housing. Prospective tenants will be competing for your property!
This lets you charge higher and higher rents — until the biggest bidder comes along.
Protection Against Inflation
Real estate is a huge hedge against inflation.
As prices go up, so does the value of your property!
This makes real estate a great long-term investment because you're protected against rising prices.
Plus, even if your property doesn’t appreciate…
You’ll be raking in cash flow from your rental income every month!
Talk about double-dipping.
Tax Benefits
Another reason to invest in real estate is because of the tax benefits that come along with it.
For example, you can deduct expenses like mortgage interest and property taxes from your taxable income. This can help you save a lot of money come tax time.
If you're looking for a great investment opportunity, real estate is worth considering. Even during a recession!
Just be sure to do your research and…
Make Sure To Buy in a Good Location
Real estate is all about location!
Even though there’ll be a big boom in prospective tenants during a recession, you want to be in the right area of your local market.
Sure, you can charge higher rent rates during a recession.
But can your prospective tenants afford the rental rate you want?
In some areas of the town/city you own property in, people can afford everything. In other areas, not so much.
So be conscientious of the area your investing in and do your due diligence.
Regardless, a recession would create some huge opportunities for savvy real estate investors.
The only question is if you’ll be the one to take advantage of them.
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.
