The Great Recession from 2007 to 2009 has caused economists and investors to be more attentive to various factors that will lead to weak and negative growth in the economy. Drop in consumer spending, economic output, and employment rate are telltale signs of a recession.
Although when it happens it happens, it’s still possible to prepare for a recession. For instance, the Great Recession has taught property investors to protect their investments and minimize losses when things in the market go awry.
Take note of these things to help you brace for a recession if you’re a real estate property investor.
Read, Research, and Attend Networking Events
It’s easy to get caught up in your business activities when the market is doing alright. As it takes a downturn, it’s a great time to gain some insights and learn. Take some time to research and read about the economy and how market declines in the past impacted property investors.
You can also attend conferences and events that discuss matters relevant to your field. Know how to diversify your investment portfolio and put your money in other markets. Learning will get you far and help you to become successful as an investor. Whatever happens in the market, you can make informed decisions if you equip yourself with knowledge.
Target Short-Term Goals
Uncertainty and panic often ensue when there’s an economic meltdown or economic downturn. In such difficult times, people tend to get reckless in their decision-making, an attitude that can put their investments at risk.
While looking at your long-term goals is crucial, sometimes you might overlook matters right in front of you, especially in a critical event such as a recession. Aiming at immediate, short-term goals can help you navigate difficult times and increase your chances of hitting your long-term objectives.
For example, if you’re a rental property owner, you can focus for the meantime on maintenance issues and tenant retention instead of planning for business expansion.
Keep track of your expenses and begin saving money to brace for unexpected events. Postpone large expenses, such as a house improvement project or a new car purchase. Assess your investment portfolio and see if any adjustments are possible.
You can also consider various scenarios that can impact your property rental business. For instance, what if a rental unit is vacant for a longer time than usual? What if your renters are paying late?
Check Interest Rates
Interest rates can tell you whether the economy is doing good or poorly. Rising interest rates impact the capitalization rate, which points to the rate of ROI on a rental property. Since every investment portfolio is unique, soaring interest rates will hit each investor differently.
Investors who are planning to sell may get great returns. But if your goal is to borrow money for a large purchase, the cost of the loan will be higher. Moreover, this situation is a boon for property investors if they raise the rent. Typically, high-interest rates can lead to fewer folks who can qualify for a home loan, which results in more people looking for long-term rentals.
Take Advantage of Digital Marketing
Digital marketing can help in improving brand awareness. If you have a website, make sure to update its content. You can start a blog and write at least one article a week related to property investment.
Good marketing during a recession can boost website traffic, attract reliable tenants, and generate more profits. Be creative when making your marketing plan because the more unique your way of marketing your brand, the more people will be attracted to it.
Make No Compromises When Buying
If you have an opportunity to diversify your portfolio or invest in other markets during a recession, make sure that you make no compromises. Remember that you’re making a purchase in a volatile market, and it's a risky endeavor.
Make sure you get what you’re looking for, and be wary of red flags in your purchase. Always do your research and double-check the investment if it’s advantageous to you.
Patience is the Key
Highs and lows in the real estate market are inevitable. If you understand that there are risks in this industry, you’ll learn in the long run that being patient can help you navigate the market better.
Pay attention to fluctuations and be ready for the right time to purchase a property. Be patient, but stay engaged.
Being a property investor during a recession is indeed a difficult role to play. But it doesn’t mean that all hope is lost. There are things you can do to protect your investment and minimize the risks in this situation.
Beforehand, prepare for unforeseen events and study the fluctuations in the market. When the recession happens, keep track of your expenses, prioritize short-term goals, improve your brand awareness, and check for red flags when buying for investment or expanding into other markets.