Reasons to Invest in Real Estate During a Recession
It doesn’t matter who you ask, most economists agree that we’re either in a recession or on the cusp of starting one.
The big question is should you still invest in rental real estate even during a recession? The answer is yes.
In this article, we will offer you several reasons to invest in rental real estate even during a recession.
3 Reasons to Invest in Real Estate During a Recession
1. Housing is always a basic need
When an economic crisis hits, people lose their jobs, income, and potentially their homes. During these periods, it can be quite easy to find renters. Housing is a basic need, and there is always a demand for housing. We can hold off on buying a new phone or a new car, but it would be rare to find someone voluntarily deciding to live on the street.
You won’t have serious problems finding tenants if your rental property isn’t neglected. Proper management of your properties and buying your home in a great location are crucial to maximizing the benefits of your investment property.
2. Residential real estate over commercial real estate offers comfort during recessions
You might think that commercial real estate is more dependable than residential real estate. After all, some companies have survived a flurry of economic crises since the 18th century, so they’re experienced enough to stay afloat.
But if our experience with COVID-19 told us anything, commercial real estate isn’t as straightforward as it seems. Many businesses closed down, old and new, whether by economics or by force. We find ourselves in an interesting spot and must consider the external threats to commercial real estate right now, such as supply chain issues and the rising cost of gas.
On the other hand, residential homes aren’t subject to the economics of business and the global economy. People need a place to live, regardless of what’s happening in the world.
3. Real estate tends to be more stable
The Great Depression and dot-com bubble flipped the stock market on its head, but investors in the residential estate space didn’t suffer as severe losses. In fact, single-family rental assets recorded positive values as a sector at the tail end of the Great Recession.
Small-scale residential real estate investments aren’t a part of daily trading activities like stocks. As such, they provide stability when stocks are volatile.
As a rental property owner, buying investment properties is undoubtedly an attractive and worthy adventure with many economic benefits. But before you write that check, here are tips to help you make a great home-buying decision and maximize your investment properties in the long run.
Tips To Keep in Mind When Buying Investment Properties
Below are two rules to follow that will help maximize your real estate investment.
- Consider the location
- Think about cash flow
1. Consider the location
When evaluating rental properties to buy during an economic crisis, get the full lay of the land. It’s vital to remember that the goal is to buy the location, not the house. Therefore, scout out areas with stable employment and job growth potentials.
The job market can upset your rental income plans. Tenants may be unable to pay rent and relocate to another area if they’ve been laid off and have difficulty finding a new position.
What’s more, consider lifestyle too. For example, areas close to downtown are more desirable for renters. However, when an economic crisis comes around, residents might wind up changing their location sentiments. Be sure to track the trends. Are people looking for urban dwellings? Suburban or rural?
In 2020, we saw a significant shift towards the suburbs and rural areas due to the rise of remote work and a desire for more space. Will this change with the next recession?
2. Think about cash flow
Another rule to help you make the best real estate deals is keeping cash flow top of mind. For example, suppose you’re looking to include a rental property in your portfolio during an economic crisis. In that case, check out properties with excellent cash flow. These are properties with cash still coming in after removing expenses and mortgage payments.
Such rental properties will help minimize the risk of even a recession.
Contact RPM Central Valley
At RPM Central Valley, we specialize in managing single family and multifamily properties in the Central Valley area.
To learn more about the services we can offer you, contact us today, call (209) 572-2222, or click here.