Three Reasons to Choose Real Estate in a Recession
Whenever the country faces an uncertain economic future, there is a lot of concern over what investments should be made or avoided. Real estate investing had mixed reviews when the 2008 recession hit, but for the most part, such an investment can help with income generation and diversifying your financial portfolio. However, a recession can affect the value of any property investment. As Roger O’steen of Jacksonville property development has found, a recession can be a great way to boost profit generation and increase land holdings for a fraction of the estimated cost. The key to this success is to know what you are doing.
Where to Go?
There are several types of real estate investments you can make when the market is good that will have completely different potential o challenges when the market falls. For some, such as the Roger Osteen Jacksonville development company, it’s all about the location and the need to be met. Move past the real estate bubble that occurred during the last decade and think of the long-term potential with property rate increases and consumer demand for short-term housing. If a recession is looming, you may not want to sink your money into a commercial property venture, especially if the location will be servicing small, local companies. Your best bet may be to look into a less costly investment, such as a fix and flip or buy and hold residential property. The less capital involved keeps your bottom line strong but still offers great income potential down the road. Property investment has the ability to offer stable income, generally outperform stocks and bonds, and could be less sensitive to volatility.
Income Stability
Most risks are taken with property investments because of the long-term opportunity for a stable income. With a real estate investment trust (REIT), it can bring dividend, where the direct ownership generates pocket rental income for the investor. The consistency of the yield is what has many people looking at real estate investments to get through a recession. Rental properties don’t often see a dip in income, as tenants still require housing and many homeowners may move toward short-term units for more affordability. The monthly payment that tenants make isn’t tied to the ups and downs of the stock market, giving real estate investors an edge when facing a recession. Rental units can also be adapted to account for inflation, as investors can also raise the rent if extra funds are needed.
Superior Performance
When it comes to investing, you can’t stake your future on past performances. However, real estate has always been seen to consistently deliver profits, even when stocks and bonds falter. It all depends on the type of investment you are willing to make. Some consider an investment in multifamily housing more of a risk than commercial retail space, but it also depends on if you are playing the long game. Success with real estate in the midst of a recession is largely dependent on your strategy. A recession may weaken the value of homes, so your idea of investing for a high-cash return will need serious thought.
Volatility Sensitivity
Investing in the stock market brings highs and lows from day to day, although a recession may see a more serious decline in a portfolio’s yield. Since real estate has a low correlation to which direction the stock market is moving, it can be the most reliable investment choice when a recession hits. Real estate may have a change in value according to paper, but the yearly income it may generate changes more slowly.
Even with the threat of a recession looming, the real estate market is strong. This could be a good time for you to make an investment in your future.