Two things are happening in the real estate market as we approach Q4 2022: a recession has set in, and the housing market is correcting itself due to rising interest rates.
The market we’ve been used to since the pandemic began in 2020 is on its way out. We’re looking at predictions of a buyer’s market for 2023 as well as economic turmoil for American businesses.
Fortunately for real estate investors, preparing for a market change – positive or negative – doesn’t rely on new tricks, sneaky strategies, or industry secrets. The best way to prepare for change is to get back to the basics.
5 Strategies for Real Estate Investment Adaptability
1) Wait out unfavorable conditions
CORE FUNDAMENTAL: BUY AND HOLD
When the market takes a turn for the worse, the worst thing you can do is panic. Plenty of investors are familiar with the temptation to cut and run when things aren’t going so well. Remember, though, that the market moves in cycles. Although things might get tough, you’ll always benefit from holding on in real estate. It’s not like other assets that may not bounce back.
When the market changes, stay firm. Fair-weather investors never come out on top. Persevere.
2) Invest primarily in stable markets with growth potential
CORE FUNDAMENTAL: LOCATION, LOCATION, LOCATION
As a real estate investor, your priority should be on building the strongest foundation possible for your portfolio. What that means is that you not only choose the right kind of real estate investment but that it’s in the right place. A recession means that many businesses and local economies are going to struggle. You’ve got to assess your investment markets and find the places that have the tenacity to survive…and thrive.
For example, Houston was a bastion of strength when the Great Recession decimated most real estate markets at the time. This was, in part, due to a diversified local economy that attracted professionals and stabilized both housing demand and property values in short order.
3) Use lenders and providers to gain what you lack
CORE FUNDAMENTAL: UTILIZING LEVERAGE
Leverage is one of your greatest weapons. While a recession may pose economic challenges, a buyer’s market will present investors with opportunities. Balancing these two will be tough! You’ve got to utilize not only financial leverage from mortgage lenders but the experience and expertise of the pros in the real estate investment game.
Just because buying will be easier doesn’t mean every opportunity is a win. When you rely on experts to guide portfolio growth, identify strong markets and investment opportunities, and manage those opportunities wisely, you set yourself up for long-term success.
4) Assess every opportunity like it's make-or-break
CORE FUNDAMENTAL: DUE DILIGENCE
Regardless of market circumstances, due diligence is the difference between successful investors and the ones that go broke. When you approach a new opportunity, treat it like it’s the single most influential piece of your portfolio – no matter how big or small it happens to be. That means you’re running the numbers, investigating the market, establishing profit margins, and approaching each opportunity with purpose and intention.
Due diligence isn’t a one-time thing, either. It’s an ongoing process, not just a step of the acquisition. Be thorough, intentional, and diligent. It’s the only way to construct a truly great investment portfolio.
5) Maintain the highest of standards for yourself and your team
CORE FUNDAMENTAL: EXCELLENCE AS STANDARD
The market may change, but your standards should remain the same. Trust us, real estate investors can and do thrive in just about every market condition you can imagine. But they’re not thriving because they’ve got something that you don’t. They’re thriving because they keep experience at the forefront.
Great investors focus on facilitating the best rental experience for their residents. They value close communication and relationship with their advisors. They build trust with reliable management. This creates stability and continuity. You maximize cash flow and minimize risks.
As the owner, it’s your job to set the vision for your portfolio. You know what you want – the pros help you acquire it. Approaching every aspect of the investment process with quality as the top priority makes all the difference in the world.
If you want to survive anything the market throws at you, refuse to be anything less than the best.
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