Is Real Estate really a recession-proof Investment?
The COVID-19 pandemic has triggered an economic collapse, leaving real estate investors fearful. ‘Is real estate recession-proof?’ is a question on many minds. In reality, Real estate has performed better than other investments during previous recessions or financial crises, prompting some investing professionals to label it as a recession-proof investment.
Knowing when another recession is approaching is one thing; knowing how to intelligently invest at each stage of the economic cycle, especially during a recession, and still making a substantial profit and achieving maximum success is quite another.
What is a Recession?
A recession is a prolonged period of low economic activity that might last months or even years. When a country’s economy faces negative Gross Domestic Product (GDP), soaring unemployment, declining retail sales, and contracting measures of income and manufacturing for an extended period, experts call it a recession.
During a recession, the economy suffers, individuals lose their jobs, businesses make fewer sales, and the country’s overall economic output plummets.
During recessions, how does real estate fare as an investment?
Even when the stock market is performing poorly, many investors would confirm that real estate is a safe haven. Property values grew in three of the previous five recessions, and investors who played their cards right were able to profit handsomely. Residential real estate is considered the finest recession-proof investment since it is a long-term investment that is not affected by short-term occurrences.
Why should you invest in residential property?
Stock volatility is less of a factor
Bonds and equities have faltered in previous recessions, while residential assets such as multi-family and single-family homes have shown to be more safe investments.
Invest while property prices are low, and you’ll see a return on your investment
It’s not the best time for individuals looking to sell their homes during a recession. If you want to buy or invest in real estate, though, it might be a good moment to do so.
In times of economic instability, demand for houses will not dwindle
Even amid the COVID-19 outbreak, people require housing. Rental flats are in great demand, as many people prefer to rent rather than buy them during economic downturns. As a result, even if other investments suffer during a downturn, rental property will remain in high demand making real estate a recession-proof investment.
Building a Portfolio That Will Survive a Recession
Defending Your Investment Portfolio
During a recession, there are two critical techniques to protect your real estate investment portfolio:
Pay attention to your cash flow
Even if property values fall in the short term owing to increased bond yields, good recession-resistant commercial real estate assets like self-storage may generate consistent cash flow across all economic cycles.
Debt reduction
Property owners who have not yet refinanced should take advantage of low-interest rates to pay down huge loan sums.
Concentrate on Liquidity
During a recession, it’s wiser to abandon some of your lower-producing investments. It would be a wise decision to sell or move your money into recession-proof investments i.e something that is projected to do better financially before the recession arrives.
Invest in Debt Instruments
Locking in long-term, fixed-rate debt is one strategy to protect against interest rate risk. Investors who perceive they are on the verge of a recession are more likely to lock in debt for a period of 7 to 10 years. This is ample time to withstand a recession and emerge in good shape on the other side, without having to worry about debt maturity.
How Can a Realtor Assist During a Recession?
Many people are struggling to make ends meet during the recession, and if you’re one of them, you should seek the assistance of a realtor. A realtor can make life easier for you throughout the recession by guiding you through your investment properties and ensuring that you obtain the most profit and advantage from them.
There are numerous reasons why a realtor could be able to help at this period in the market, including the following:
Get assistance with your loan
One of the first things a realtor can do for you is to assist you with your loan. You need to know when you’re in foreclosure, when you won’t be able to sell your property, and when you can anticipate the bank to foreclose. That’s why you’ll need to select a realtor that can help you understand your lending possibilities.
Provide additional assistance
There are several ways that a realtor may assist you during a recession, but the most important thing to remember is that they are eager to provide you with the extra assistance that you require. They’ll assist you in locating the ideal locations to purchase the property you want.
With such comprehensive advantages and diverse means to protect your wealth, ‘Is real estate recession proof’ is not something you should be worried about. Instead, you can delve into planning and securing your future with such recession-proof investments.