If there’s one thing we can say for ourselves, it’s that REI Nation has just about seen it all.
We were founded in 2003 – meaning the upcoming year will be our 20th anniversary! And in those twenty years, we’ve seen the market twist and turn from the 2008 Housing Crisis and Great Recession to the COVID-19 pandemic and all the ups and downs in between.
We’ve battled the unprecedented time and time again. And in that process, not only have we been refined by fire, but we’ve succeeded in helping thousands of investors build passive wealth.
The bottom line is this: we know how to handle anything the market can throw at us. We’ve got the experience and the systems to get it done right. And because of that, we can bring you insights into the industry – insights that can shape a successful real estate investment strategy.
If you’re nervous about investing in the current state of real estate, never fear – we’ve got the guidelines you need to follow.
6 Rules for Buying Investment Properties During a Recession
Rule #1 – Buy with purpose
Investing in real estate isn’t about snapping up every opportunity in front of you – even if those opportunities look good. Successful portfolios are built with purpose. They have intention behind them. This may not seem like a crucial point, but aimless acquisitions will leave you with a discombobulated portfolio. Instead, aim for cohesion. What role do you want this property to play in your portfolio? What are your specific plans for it and its cash flow, both now and in the future?
Establishing your purpose for each property will prevent you from buying an investment that doesn’t fit in with the rest – and one that you’ll inevitably want to offload.
Rule #2 – Choose your locations wisely
Your investment market always matters, but even more so during a recession. Investors want to target markets that not only have a robust rental market but those with a tenacious local economy as well. The markets that fare the best are those with reliable, steady growth. They’re ports in the storm. This decreases the chance of an economic crisis in your individual investment markets, which can, in turn, cause rental demand and rates to drop.
Rule #3 – Be willing to wait
When investing in real estate, time is of the essence. We’ve emphasized repeatedly that investors shouldn’t wait – they need to invest ASAP to give their buy-and-hold assets the best chance of building real wealth. But we must strike a balance.
When you speak with your advisor, be specific about what you want for your portfolio. (This goes back to buying with purpose!) If there’s not a deal available that suits your vision, don’t settle. If you at least have things in motion, you’re doing fine.
Be okay with waiting for the right opportunity. Be picky. It’s how you get what you really want.
Rule #4 – Use tax-advantageous buying strategies
Getting the most bang for your buck is essential in this economy. Investors can combat some of the high costs of the real estate industry by positioning themselves in tax-advantageous strategies. Utilizing a 1031 Exchange, for example, allows investors to swap a like-kind property for another. This is a way to edit and refine your portfolio tax-deferred.
Similarly, you can invest through a self-directed IRA. An SDIRA holds all your properties and profits. Investment-related expenses flow out from this account. It’s all contained in one neat place. The best part, though, is that you invest tax-deferred until you choose to pull a property or profit out of the account.
Rule #5 – Prioritize portfolio diversification
Portfolio diversification defends against the unexpected. You reduce your risk by investing in multiple properties, asset classes, and investment markets. The combined cash flow and climbing equity compound your wealth-building efforts while also protecting your hard-earned cash from unexpected bumps in the road, like vacancies, natural disasters, or other economic challenges.
Rule #6 – Rely on real data
Never take on an investment because of a hunch. Though there’s something to be said for gut feelings, you can’t let them guide your decision-making. When you’re looking to buy in a tight market, use real numbers and data to analyze the deal. Don’t guesstimate. Gather real numbers, set clear and specific goals, and don’t settle for properties that don’t measure up.
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