Over the last couple of weeks, all I’ve been hearing is the recession is coming. Everyone from my clients to the news reporters has been losing their minds about the market crashing and me well, I just put in another offer on a multifamily property. Wanna know why? The thought that we could have a recession doesn’t matter me because I am investing in QUALITY real estate.
Here are a few facts to consider about real estate if a recession should occur
- People will ALWAYS need a place to live in!Interest rates are still at record lows compared to decades ago.
- Again people will always need a place to live!
- Affordable housing in decent neighborhoods will always rent to cashflow.
- Banks can NOT call loans due that are in fixed terms like 30 year FHA, which means your payments will not change during a recession.
- However, banks will STOP lending during recessions so tie up all of their money while you can invest in GOOD INVESTMENTS.
How I plan to prepare for the recession (if it even happens)
- I plan to buy property in areas where rents will continue to be affordable (close to public transportation, decent schools, close to highways)
- I will ONLY buy multifamily properties that way if one unit goes vacant, I have another that can cover the mortgage if it is one.
- I will NOT buy anything I don’t plan to hold for the next 5 to ten years (be cautious flipping houses)
- I will slow down but not STOP rehabbing houses to pull ARV equity because If the market crashes; values can plummet and paralyze the deal.
- Last but not least, I will keep a pile of cash for the acquisition of new assets at super discounted rates.
Now to wrap this up!
There’s never a wrong time to buy a piece of property. The numbers have to make sense. You have to be able to weigh out all of your options. Can you rent this to middle and low-income tenants if layoffs occur? Do you plan to sell within the next 1 or 2 years, or can you hold through a crash? These are all questions you have to ask yourself.
However, as long as you go into investing with a clear strategy, a recession should never stop you from taking advantage of a good deal. Even the highest renting units in our portfolios could be reduced a few hundred bucks and still cover the mortgage. That’s how you play the game; you minimize risk and strategize. So the next time somebody tries to spook you about the recession I want you to tell them that people will ALWAYS need a place to live!
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