An economic downturn can be devastating to the development of any country, and most governments do their best to avoid it, but it may be inevitable. So when such a time occurs, it only makes sense for smart investors to think outside the box and make the best out of the environment. This is the time when the market is disrupted and the prices for available properties are low.
Let’s face it, COVID-19 is currently proving to be a threat to the development of world economy and the market in the United States may be subjected to the first recession since 2008.
Stable income from long term rental properties
As long they are occupied during this time, long term rental properties can be a good source of income. When the economy is doing well, such properties are highly priced and may be out of reach for many investors due to the competition. During an economic downturn, however, the prices for such properties drops drastically due to the bad economy.
During an economic downturn, the demand from foreign equity will drastically drop since their access to the U.S markets will be limited. During a time like this COVID-19 outbreak, for instance, most investors will face challenges investing overseas. This can only mean one thing; a drop in demand for commercial properties. You may even see the need to go for the unoccupied property at this time as these will be priced much lower. This can be a smart investment for the future when things finally get back to normal and business picks up.
Real estate can be less volatile during an economic downturn
It is no secret that an economic downturn can lead to devastating effects on businesses. Some notable traditional investments are greatly affected at this time, and you do not want to touch on these due to their volatility and unpredictable wings. However, this is not the case for real estate as this is the time when occupied commercial properties remain stable. At this time, commercial property may outperform traditional investment options.
Usually, most investors would look at various options that would not only offer stability but also a quicker chance for return on investment. Economic downturns, provide real estate investors the opportunity to evaluate properties previously out of their price range. They should consider land purchases and even commercial construction during this time to prepare for an economic upturn.
When stocks and bonds falter, real estate remains stable as long as the property is occupied. As a smart investor, you would not only take advantage of these benefits of investing during an economic downturn, but will also seek for ways to make your property recession-proof.
One of the best ways to do this, especially for residential property is to apply long term leases. This will ensure that you not only have a steady flow but also help you deal with the frequent search for tenants. Always screen your tenants to ensure that you are taking in the right persons who can afford to pay the rent comfortably. Always work on ways to retain your tenants for as long as possible.
