Business headlines make us worry sometimes.
Here’s a couple from the end of 2018: “Stock market on track for the worst December since Great Depression” and “Stock market so volatile that even big shot hedge-fund managers are struggling.”
Or you may have heard that stocks had their worst Christmas Eve trading day… ever. Sure, they bounced back upward after Christmas but that volatility means one thing.
FEAR.
Fear among consumers…
… And, fear among real estate investors.
Fear can keep real estate investors from making deals and funding new projects with private money lenders in PA.
Most economists now believe we are heading toward some measure of recession sometime soon, and there are indications that housing prices could cool down or even drop. Did you know that some real estate investors are taking steps to mitigate their risk? They are making investments in ways that don’t keep them up at night worrying about a real estate market correction. Here’s three recession-proofing recommendations from these expert real estate investors.
1. Buy for cashflow, not appreciation
If your real estate investment strategy is counting on 15% annual appreciation or maybe 10%, or even just 5%, it’s probably a good time to rethink your strategy. Real estate investing gurus have always said that appreciation is the icing on the cake. Invest for cashflow. That way, if your property fails to appreciate or even drops in value, you’ll still be okay. It’s a good time for buy-and-hold investing or a strategy of renovating, renting it out, and refinancing. It’s also a great time to be investing in multifamily apartments as they are more resilient in recessions.
2. Be selective
House flipping is hot right now across the US, but did you know that only about 30% of houses flipped in 2018 were bought as distressed properties? What?! A lot of flippers are buying full-priced houses off the MLS and attempting to force appreciation by renovating—I can’t even call it rehabbing as many of these homes are already more than habitable. Don’t buy at full price. Be selective. Find the deals. Look for the houses that need real work and can be purchased at bargain prices. You’ll be able to force more appreciation and get a much better return on investment.
3. Stick to the numbers
Real estate investing professionals can’t afford to be falling in love with properties at first sight, especially if the market is cooling. Instead of how a house makes you feel, make your decision to buy based on the numbers alone. Will this flip generate a good return on investment? It’s always easier to get your deals financed with hard money loans from private money lenders in PA when you’re doing a flip for profit and have the math to prove it.
Summary
A housing market correction could be starting, and, if it is, these are three recommendations that investors can follow to lessen their exposure to risk. Buy for cashflow, be selective, stick to the numbers, and you can certainly keep the deals flowing and finance them with private money lenders in PA.