How to Recession-Proof Your Real Estate Investments
The Guardian recently reported that the housing market will see a sharp cooldown in 2023 as the UK enters a recession. Housing and real estate property investors and experts believe that property prices are likely to decline by 5 to 12 percent as a result of this. In a worst-case scenario, this decline could be in the 15 to 20 percent range.
Like the UK, the US is also following a similar trajectory, it seems. As reported by The Hill, economists are already sounding the alarm. According to them, a US housing recession is already brewing. The Housing Market Index, measured on a scale of 100, spells trouble the moment it’s below 50. As of November 2022, that index reached 33.
When a recession hits, the real estate market becomes unstable. In many cases, it’s one of the first markets or sectors to take a big hit, which is why it’s vital that you recession-proof your real estate investments. Here’s how that can be achieved.
Learn to Identify Emerging Markets
Straight from a Deadlinenews article by David Kezerashvili that talks about real estate investments post-COVID, it’s realized that home renters or tenants are growing increasingly aware of the advantages of owning a house. They also understand the state of global real estate investments and see the new opportunities they have in investing in various properties in the future.
As more and more people start to grow aware of the advantages of owning a home, the real estate demand also grows. Because of that, new real estate development projects need to be undertaken. These projects are not centered in one specific region but across many where people would like to be a part of the community and economy.
Thus comes the need to identify emerging markets. These don’t necessarily have to be busy city centers. Even suburbs can host these new emerging markets and the people looking forward to financing them.
Understand What Drives a Return on Investment (ROI)
By keeping track of the money and resources you spend, you’ll get to understand what drives a return on investment (ROI) and what doesn’t. In many cases, you’ll find that you’re only spending money and resources but getting nothing or almost nothing in return. That’s when you should pull the plug on your investments or funding and investigate where you’re going wrong.
You need to ask yourself a few questions in this regard.
For every dollar you invest in your real estate project, what are you getting in return? Are you getting a specific financial return? Are you happy with the return that you’re getting?
Asking these questions and realizing their answers can help you decide whether or not you’re getting the leads or results you’re looking for in exchange for what you’re investing.
Have a Financial Safety Net
During turbulent times, it’s always a wise decision to have some financial security. Otherwise, any wrong move or investment decision can render you penniless. One way to establish such a financial safety net is by taking a few necessary precautions beforehand.
Start by increasing the rent if you’re a house owner and have tenants. You can even start charging a few additional fees, given that you’re allowed to do so in your state or county. For instance, you can impose an extra pet fee for allowing people to have pets inside your compound. Note that you might have to provide a few additional services if you do charge that fee, like handling extra clean-ups.
Keep Branding Yourself
You wouldn’t want to disappear off the radar in the real estate market, especially if there’s a recession coming. Hiding will do you no good. It’ll only make things worse when you try to resurface, maybe after the recession.
Instead of hiding, just keep branding yourself and your real estate portfolio. If necessary, focus on digital branding, where you don’t have to invest a lot of money to put your name out there. Aimed at the right people, your marketing strategy can actually secure good leads for you even during the time of a recession.
According to CNN and its economic experts, the world is heading towards a global recession in 2023. The global economy keeps slowing down. Even after a sharp downturn in 2022, experts believe that this slowdown will continue into 2023.
Therefore, if you invest in real estate, you must know how to recession-proof your portfolio. Unless you do that, it’ll become very difficult for you to come out of the recession in one piece and reinvest in real estate once again.