Real Estate: The Recession-proof Investment

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Many Americans are starting to worry about the possibility of a recession, and from the looks of the stock market, it would seem that now is a bad time to be making any new investments. However, real estate experts aren’t wringing their hands over what the Dow Jones is doing. Many of these experts believe that investments in real estate can weather any upcoming financial storms. While it can’t be said with certainty that your investment is fool-proof, apart from gold and certificates of deposit, real estate investments tend to withstand recessions quite well. Both baby boomers and millennials are focused on pursuing real estate investments, though experts are predicting a heavier influx of investments into the Southern U.S. over the next year. If you want to take protective measures with your finances, consider real estate.

Focus on Liquidity

During a recession, some of your weaker-producing assets are better left abandoned. If you could sell or move your cash into something that is expected to have higher financial performance, it would be a smart move before the recession hits. By freeing up cash that may be tied up in these smaller investments, you will have the money on-hand to tale advantage of a bigger or higher-yielding deal down the road.

Move Away from Vacation Homes

If you have filled your real estate portfolio with vacation homes and rentals, you may want to consider selling these. During a recession, vacations tend to be put on hold as people try to conserve funds. A weaker demand often causes the value of vacation homes to drop considerably.

Try Out REITs

You may be holding onto several large properties, but when if the economy is headed toward a recession, you may have more yield with an investment into real estate investment trusts (REITs). Although they are technically considered a stock, it is a real estate asset that doesn’t rely on the stock market. REITs are considered stable income because of the associated long-term leases on properties. You could use your funds to buy shares in any publicly-traded REIT, rather than trying to manage a property with all of the costs and demands of tenants and maintenance.

Look Into Multifamily Options

During a recession, foreclosure numbers rise and home sales often fall. When affordable housing becomes a problem, rental units become in high demand. Multifamily options include duplex property, triplexes, or apartment complexes. You have less risk of monthly profit loss when the rent is spread over several families or units, but you should also invest in an insurance plan that can protect from lost income if a renter defaults. Steven Taylor, and his company Taylor Equities, have relied on multi-family housing investments to build a highly successful real estate business.

Consider College Needs

College students are always looking for affordable off-campus lodging, so if you live in or near a college town, this may be a good investment. College enrollment, when looking in the right market and athletic conference, tends to remain strong during a recession.

Though there are predictions of a recession, don’t be hasty in your investments. Carefully research your options and evaluate both the short and long-term financial prospects of your choice.

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