Things Real Estate Investor Should Be Doing To Prepare For the Downturn
Monday Apr 20th, 2020
The last major economic downturn occurred a decade back, and the economy has only been improving at an unsustainable rate since then. Real estate prices are high every season, just like the peak before the Great Recession (occurred from 2007 to 2009). According to a study conducted by the National Association for Business Economics, “half of the panel expects the next recession will occur sometime between the fourth quarter of 2019 and the second quarter of 2020.”
During the Great Recession, many people lost their homes and job, but there was another side to this story.
Talking about the Great Recession, real estate investors tell it was a time of great opportunity as numerous properties were available at noticeably discounted rates. These experienced investors suggest that the best defence against a future downturn is to be prepared for it. That is why here are the five things that every real estate investor should be doing to prepare for the recession. Let’s have a look!
01 – Keep Buying but Never Compromise On Your Criteria
The experienced real estate investors know that you shouldn’t wait to buy real estate. Investors purchase properties as per their well-defined criteria. So, whether the market is down or growing higher, smart investors never get into trouble because they don’t compromise on their criteria.
Unarguably, there will be lesser deals in an overheated economy, but if you look a little closer; it’s right there. Look out of state in markets that are still affordable. Places like Toronto and Ontario have strong economies as well as are not overheated. The idea is to look for the hidden value that can be turned into a great deal.
02 – Save Now to Spend It Later
Now is the time to focus on saving rather than spending. It’s better to keep a hold on making significant purchases like buying a vacation property, purchasing a new car, or planning a trip. Moreover, wherever you decide to put your saved money, be sure that it’s immediately accessible so you can spend it at the right time.
03 – Make an Investment In Your Properties
In case, there are no deals around, you can use the saved money investing in your existing properties. The key term here is ‘invest’ in your property, which means any amount that you spend on the property should generate a return – either in decreased costs or higher rents. For instance, you add a bedroom to your property which costs around $5,000.
Before you make any investment, you will want to make sure that the additional bedroom gives you more than $500/year in a greater than 10% cash-on-cash return or higher rents. Therefore, the money you invest in your property today will provide the same or more return tomorrow.
04 – Develop Relationships with Multiple Banks
Another real estate investing tip is to spread your money around different banks to develop relationships. When you have a relationship of at least one year with a bank, it will be easier to qualify for the loan for future investment. The best place to develop a relationship with a credit union or an investor-friendly local community bank than a national chain.
Go for a bank that has worked with real estate investors, so they can come up with creative ideas when putting together financing. Depositing money is a great way to form a relationship, but what’s even better is to make a deal or two. If you deal with a bank, it becomes hassle-free to qualify for the second and third loan.
05 – Build Your Network and Reputation
This one is not only about gathering several wholesalers and real estate agents; instead, it’s about getting to the top of their list. Why would a real estate agent call someone who is difficult to work with or has a non-serious attitude? So, think about building a good reputation to get to the top of the list.
Furthermore, consider building your network in different markets. It’s unpredictable how the recession will affect every city. Therefore, you have access to the best deals of multiple markets by expanding your network.
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