How To Recession-Proof Your Real Estate Investments
TL;DR - Follow the 5 strategies to recession-proof your real estate investments: hold your existing properties, update/renovate your properties, get fair market rental value, consider risk and yield, and diversify your assets.
The biggest, scariest word in the investing game…
Recession!
You can almost feel your investments lose value as you hear it!
And while recessions can be tricky for real estate investors…
There are proven ways to come out of them on top.
Let’s recession-proof your real estate investments.
How To Recession-Proof Your Real Estate Investments
What Exactly Is a Recession?
In short, a recession is when the economy experiences a sustained period of decline.
This usually happens when there’s a decrease in consumer spending, business investment, and employment.
While the effects of a recession can vary depending on its severity…
They typically include things like:
A rise in unemployment
A decrease in wages
A decrease in housing prices
An increase in foreclosures
As you can tell, recessions can have a pretty big impact on real estate.
That’s why it’s so important to have a game plan for how you’ll weather the storm.
The good news is…
There are some tried and true strategies that’ll help you recession-proof your real estate investments.
Let’s take a look at them.
5 Ways To Recession-Proof Your Real Estate Investments
There are a few key things you can do to make sure your real estate investments thrive during a recession.
By following these strategies, you’ll be in good shape when the economy starts to rebound.
So, what are they? Let’s dive in.
Strategy #1: Hold Your Existing Properties
This is one of the best things you can do to recession-proof your real estate investments.
When a recession hits, there are usually two things that happen with properties: prices go down and/or foreclosures go up.
If you’re holding on to your existing properties during a recession, then you’ll be in a much better position when the market starts to rebound.
Not only will you avoid having to sell at a loss…
But you’ll also be in a prime position to take advantage of good deals because of lower property prices and increased foreclosures.
On top of that, you’ll be banking cash flow all the while!
It’s a win-win-win.
Strategy #2: Update/Renovate Your Properties
Another great way to recession-proof your real estate investments is to update or renovate your properties.
This will not only make your properties more valuable…
But it’ll also make them more attractive to tenants.
And when there’s high demand for rental properties, you can charge higher rents. This will help offset any decrease in income you might experience during a recession.
Strategy #3: Get Fair Market Rental Value
One of the best ways to recession-proof your rental property investments is to ensure you’re getting fair market rental value.
This means you aren’t charging too high or too low of a rent price.
To find out what the fair market rent value is for your area, you can use a tool like Rentometer or hire a local property manager to help you out.
By charging the right rent price, you’ll be able to keep your property filled with tenants during a recession.
And if you do have to lower your rents, you won’t be doing so by too much.
Strategy #4: Consider Risk and Yield
When it comes to investing, there’s always some element of risk involved.
But you can minimize your risks by being thoughtful about the types of investments you make.
For example. If you’re diversifying your assets (more on that in a minute), then you’re less likely to experience losses if a particular investment takes a hit.
You should also consider the yield of your investments. This is the return you can expect to make on an investment.
If you invest in a property that’s expected to appreciate in value — probably in a good market — then you have the potential to make a higher return when you sell.
But if you invest in a property that’s expected to generate income through rental payments, then your return will be lower but more stable.
Also, a lot of banks loosen lending requirements before a recession hits. They extend credit to borrowers at super low rates with high loan-to-value ratios.
This prompts newbie investors to jump on the offer, become overleveraged on risky deals, and lose out big-time.
Be cautious and focus on cash flow over appreciation. Rental income is guaranteed — appreciation is not.
There’s no right or wrong answer when it comes to risk and yield. It all depends on your individual goals and preferences.
But it’s important to be aware of both when making investment decisions.
Strategy #5: Diversify Your Assets
Last but not least, one of the best ways to recession-proof your real estate investments is to diversify your assets.
This means investing in more than one type of property.
For example, you might invest in both residential and commercial properties. Or you might invest in properties of different values.
Perhaps you forgo the landlord experience and choose REITs.
Diversifying your assets will help protect you from losses if a particular market takes a hit.
And it’ll also give you the opportunity to take advantage of different market conditions.
If commercial real estate is struggling but the residential market is doing well, you’ll still be able to make money from your investments.
These strategies will help your real estate investments thrive during the recession. So start implementing them today!
Come Out on Top
A recession can be scary and confusing.
But just like with inflation, you can build a real estate portfolio that’s recession-proof.
Follow the strategies we went over and you’ll be looking fine and dandy — no matter what the market’s looking like.
As always…
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.
