Real estate investors who were actively investing during the last recession saw deeply discounted properties everywhere they looked. They had their pick of properties and the profit margins were phenomenal. While we aren’t in the same situation currently, a slowdown is a natural part of the market cycle.
Expert predictions of when the next economic downturn will happen varies greatly but regardless, there are steps to take today to prepare for market shifts in the future.
Buy Right Today
Deals in a seller’s market aren’t as easy to come by and normally aren’t at a steep discount. Because of this, you have to adjust what you’re willing to pay for a property and also, what your exit strategy is.
Being creative now will keep your business going strong and once the market turns, the deals should only get easier.
If you’re used to solely rehabbing, it might make sense to do some wholesale or wholetail deals in the mix to keep your profit coming in consistently, for example.
For buy & hold properties (or any type of property really), be sure not to overpay. Rental properties are fantastic for long-term investments and can thrive in a recession because there’s usually an influx of renters. Purchasing a property that cash flows well in any market is critical.
Appreciation in most markets has been on a steady rise but remember that it isn’t guaranteed and when a crash happens, that steady rise of appreciation might slow down drastically.
Think of appreciation as a bonus.
Continue building your business and never slow your momentum down. Get creative with your deals and once the market turns, you’ll find deals in the buyer’s market to be a piece of cake.
Have Access to Funds
It’s important not to over-leverage right now. You need to have access to funds available when the recession begins.
If you’re using your own capital or private money, make sure there’s capacity to purchase a few properties when the time is right.
Once the recession hits, those who don’t have funds in the bank or access to OPM (other people’s money) are going to start out with an uphill battle while others scoop up discounted properties and either add them to their rental portfolio or decide to sell for a profit.
For investors who don’t have connections to lenders, now is the time to start talking to them. Let them know about your past deals to highlight your experience and you can share your intended exit strategies so they know more about who they’re going to lend money to.
When you have a deal come up, consider using a lender that you want to work with long-term so that rapport is being solidified.
Build Your Brand Now
Don’t wait until the next recession to get into the real estate investing game.
If you do, you’ve fallen behind.
Start marketing to your list and work through motivated leads that could bring you a deal. The more deals you do now, the more experience you’ll have. Your level of experience will show when you’re working with buyers and sellers.
Make sure you’ve built a brand that is representative of you and your business.
A few key areas to consider when building your brand:
- Have a clean website that is easy to navigate with your contact information on it.
- Answer the phone when a lead comes in or respond quickly if you must return a call.
- Be honest, always.
- Follow through, always.
- Have a memorable logo that fits the brand you want to portray.
- Create a tagline that fits your business perfectly.
Your actions can largely shape your brand. Always be professional as you never know who’s watching.
Watch the Market and Be Ready
Pay close attention to shifts in the market. It might be a year or it might be many years before another recession happens, no one knows.
Plan your business for both now and for the future so you can optimize your growth.