Investing is a game of winning or losing, defined, most of all, by economics. Of course, we never truly know what direction the economy is heading. However, you can hedge your bets for better or worse depending on the quality of your decisions.
When an economic downturn hits, such as the one we could be potentially experiencing now, investments generally suffer losses. GDP growth in Q1 fell short of expectations, declining by 1.4%. If that trend holds through the end of Q2 and we register another quarter of GDP decline, we’re officially in a recession by definition.
So, as investors, how should you be preparing? Invest in real estate.
Real estate values have continued to increase despite numerous recessions over the last 60 years. Sometimes, they’ve increased during the recession itself.
Even in the Great Depression, investors won big on real estate stocks in particular.
But why is this so, and what does this mean for you as a rental property owner? Again, what can you do to benefit from buying investment properties?
Let’s talk about it.
Why is Buying an Investment Property Attractive Even in Bad Economies?
Real estate is one of the most stable investments when the economy is nosediving. Rental housing generally serves as a natural hedge in market volatility. This is mainly because homeownership rates suffer a dip during economic downturns like recessions.
As a result, property owners become renters, leading to higher demand for rental properties in such situations. If the economic downturn is accompanied by an early decline in real estate market values—which is often the case—there’s a chance that there would be a brief window of time where you could purchase properties at a discounted price.
By sticking to the formulas we’ve all learned in real estate and paying no attention to feelings, you can make informed decisions, buy a property with a good cash flow,…