Is It Wise To Invest in Property During a Recession?

Recessions are, unfortunately, a part of life that we all have to come to grips with. Economies can go up and down and there’s nothing we can really do about it. We’re not exactly responsible for the economic decisions of our country, so facing a recession is something that you should usually plan for or at least consider in your financial plans.

This is why many people find it difficult to invest in property. If a recession hits, it’s likely that you’re going to end up with a property that you can’t do much with. Given the COVID-19 situation that’s occurring across the country, many people are feeling the effects of the recession but it’s happening under some very difficult and uncommon circumstances. But regardless of the situation, it’s clear that investing in property in this scenario is difficult.

But if you’re able to, is it a good idea to invest in property during a recession?

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Aiming for at least neutral cash flow

A recession can be difficult to overcome so it’s important that you focus on having at least neutral cash flow. You can’t expect too much when your tenants are struggling to pay the bills and make ends meet. Pushing them out for other tenants isn’t going to work because you won’t be able to find people who are able to pay. This is generally true for most residential properties, especially in inner-city or suburban areas. However, commercial properties tend to hold up a little better though smaller shops and independent businesses might struggle. If a recession is happening, it’s a good idea to negotiate with your tenants to see if you can at least reach neutral cash flow without risking the loss of a good tenant.

 

Investing in properties that make sense

It’s important that you focus on properties that will still be important during a recession. For example, commercial real estate in recession makes a lot more sense than expensive residential properties. It’s always going to be in high demand regardless of the economic situation and there will be people looking to take advantage of it by starting new businesses or moving locations to suit their needs. As such, you should always try to focus on bread and butter properties that will still be needed even when a recession hits.

 

Buying below market value

One of the things you can certainly take advantage of is buying any property that is below the market value. This can be tricky at times but you’ll find that some inexperienced (or desperate) property investors might try to “cash-out” early during the recession. There’s no telling how long a recession will end or if a property will be completely useless during it, so buying below market value can be a good way to plan ahead with a long-term strategy if you’re willing to wait it out and hold on to your properties. This can be challenging for residential properties, but for commercial properties, we highly suggest snatching up anything you can that is below market value and within your budget assuming it’s in a popular area.

 

Looking for a Beautiful Home or Investment Property?

If you are interested in relocating to a beautiful beach front community, or for an investment that keeps on giving, call Pam Heinold. Pam Heinold is a top Realtor on the Gulf Coast. Part of the exclusive Better Homes and Gardens Real Estate team, Pam can help you find your dream home or luxury investment property. For more information, click here now.  

 


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