Investing in real estate is a smart plan since it usually guarantees a high return value. Moreover, if you own a rental property you can profit from tax deductions or increase in house values. Real-estate is more or less a low risk investment even during recessions. However, we have listed a few tips for recession-proof real estate investing so that you can make an informed decision.
Recession-proof Real Estate Investing: Things To Know
1. Buy and Hold Strategy
The buy and hold strategy is one of the best strategies for real estate investing during a recession period. Investors usually quickly understand a resell value on their property after they have bought it. However, reselling during a recession is not a good idea. Instead, it is wise to hold on to the property and rent it out. This will allow you to earn monthly rentals from the existing property without having to give it up in a loss. This will also provide you with some stability and some cash to cover the mortgage and investments on the property.
2. Rental Strategy
If you are renting out your property, the plans should ideally be long-term. It is important to remember that travel is a luxury cost and during the times of recession, people will not opt to spend on travel. Moreover, the Covid-19 situation has imposed travel bans everywhere. Therefore, renting your property out on Airbnb may not be a stable plan. On the other hand, traditional rental strategies can save you from uncertainties. The turnover may be low but the revenue will be consistent even in severe economic crisis. There are a few things to remember for traditional rental strategies.
- Negotiate long term agreements
- Leases should at least have 6 months tenure
- Comparatively lower rental rates
- Possibility of negative cash flow
3. Cost-cutting for Tenants
It is important that the rental property not be vacant during the recession. Vacant rental properties can lead to a negative cash flow. A good way to ensure full occupancy is by reducing the rent that your tenants have to pay. You need to empathize with your tenants and understand that their rent and bills reduce their income to less than half. Therefore, you need to cut some costs to retain your existing tenants and possibly attract more. Let’s discuss the things to consider.
- Solar paneling
- High-grade windows to reduce heating costs
- Cost-saving renovations
- Refrain from unnecessary cosmetic renovations
- Fix a budget for the renovations
4. Recession-proof Real Estate: Consider all income opportunities
Consider all possible opportunities that can ensure cash flow from your real estate investment. If you have a rental property, increasing the rent is not the only way to increase revenue flow from your property. You might consider providing in-demand facilities to your tenants.
Conclusion
Here is all that you need to know about recession-proof real estate investment. Real estate is a good investment and it is easier to make it recession-proof. These tips will help you earn revenue from your property even during crisis.
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