Recession Proof Real Estate In a Year of Major Volatility is Anything Recession-proof?

by Jennifer Schimmel

Real estate investing CAN be recession-proof, believe it or not.  When choosing the right property, you need to take every detail into account.  Ask yourself these questions first… Why are you buying this? Do I expect passive income, retirement income, flip income, first home, second home, and at any point can the property be rented?  If the property has the ability to be rented easily at an affordable monthly rate and you are in the positive after all mortgages, insurance and taxes are paid, then you may pass GO.  (I mention this because situations change and there could be a time where you are unable to sell it, but the property would do fantastic as a rental)  Does the property need repairs and how much in repairs?  Have the major systems been replaced recently, such as the roof, furnace, and windows?  If the amount of repairs are minimal and all you need are some carpet, paint, and cosmetics, then this paves a positive path for you regardless of the reason you are purchasing.

What about the purchase price? Of course, that is the most important piece to all of this! Are you buying in the height of the market and paying a high premium, or are you buying on a downswing of the market?  To be honest what it really means is that when you buy real estate in a seller’s market and are paying a higher price than in a down market, you need to be mindful of why you are purchasing it and when you plan to sell the property.  If you plan on holding this property for some time and are going to rent it, remember your mortgage balance will be paid down through the rent you charge.  If you are planning to live in the home and sell in 5 or 10 years, you will need to sell it in a market identical to when you purchased it, if you bought it at a premium price, this is why timing is everything.  Keep in mind there are opportunities in every market, you just need to find them!  I have heard this saying over the years, and it does resonate with anything you invest in…. Buy Low, Sell High or Buy High, Sell High, simple concept right?

How is real estate recession-proof?

You need to be aware of your financial position with any purchase in real estate and always prepare for a market swing, if you do this you CAN create a recession-proof real estate. Yes, there will always be a fluctuation in the value, but if the property can be rented, you are still in the positive.  As you rent the property over several years and your mortgage balance is paid down, you will also have equity in the property.  If you purchased the property to live in or as a rental and you updated the property with your own money or the money you made as profit that will help gain equity in the property when you sell it at a later date.  If you purchase the property in a dip in the market and the value doubles when you sell in the right market, you again are in the positive.  It is all about how you purchase the property, that you make an educated decision and have a professional alongside you to guide you through the process.   Even in an upswing, you can make money in real estate.  Full disclosure you can make mistakes and lose money in a down market, which should not happen.  I will be honest and say it is not for everyone, and HGTV makes it look super easy!

At the end of the day always make decisions with your eyes wide open, educate yourself, choose your position wisely, and await the positive outcome!

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