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Turnkey Real Estate Investing

3 min read

Investment Moves to Make (and Avoid) During a Recession

Tue, Jan 24, 2023


Every stage of the real estate cycle – even recessions – provides opportunities for investors who know where to look. Your success in this business isn’t up to fate or the turning tides of the market. Ultimately, success comes down to how much you’re willing to work for what you want – and whether you take hold of the opportunities in front of you.

With that said, there are moves you don’t want to make in this economic climate. If you want out of this season of recession with a leg up on the competition, take these suggestions to heart!

4 Investing Moves to Make During a Recession

DO — Focus on essential assets

A recession cuts the economic fat thanks to leaner budgets and lighter pockets. Now is the time to focus on reliable investments that will continue to flourish even as your fellow Americans are dropping line items on their budget. One thing that can’t be dropped? Housing. Investing in real estate works during a recession – particularly in the case of multifamily and SFR investments – because it’s an essential asset.

People need a roof over their heads. You’ll still want to target markets with strong demand, as economic turmoil can impact the rental market.

DO — Take advantage of lower prices

Recession naturally follows inflation, and that should (hopefully) lead to market correction. Investors, take advantage of recession-era opportunities as they arise. There’s no guarantee you’re going to get a deal on real estate (the market is cooling, but interest rates have yet to come down). With that said, other services, such as those associated with property renovations and improvement, may decrease.

Keep an eye on the prices that matter to you. Look to other markets for deals.

DO — Buy and hold

Trying to time the market is stressful. That’s only truer when your investment profits depend on it! Flipping has already been tough thanks to sky-high property and construction costs. The recession will only make it harder for investors trying to sell.

Instead, buy and hold. This strategy means you can afford to wait for the market to swing back in your favor. Tough it out – you’ll be glad you did.

DO — Multiply your sources of cash flow

Recessions create income uncertainties. Beside job loss, inflation has also hurt the value of your salary. Unless your employer makes the effort to compensate you for rising prices, you’re going to find the budget a bit tighter this year.

You can avoid this crisis by increasing your streams of cash flow. Real estate investments, like SFRs, generate passive income on top of increasing in value over time. The more properties you hold, the more cash flow you’ll secure.

4 Investment Moves to Avoid During a Recession

DON'T — Make speculative investments

A recession is not the time to be daring. Play it safe with investments that are reliable. Bidding on start-ups and emerging industries may be a gamble you can’t afford to lose right now. Avoid untested investments for the time being. Your risk tolerance may vary, but a recession puts everyone in a precarious financial position. That house of cards can come down in the blink of an eye, so build yours on the firmest foundation possible.

DON'T — Pull your money out

There’s a temptation to avoid losses by selling off stocks or other investment assets during a recession. Don’t listen to this impulse. Not only does it create a domino effect that hurts all the investors involved, but you’ll miss out on the recovery and rise when the recession is over. Don’t panic if your investments lose value. You may need to make some adjustments, but it’s almost never worth it to throw it all away.

DON'T — Take unnecessary risks

Beyond direct investment-related risks, other financial hazards are at play here. Avoid taking out an adjustable-rate mortgage, even if you expect rates to drop. That’s what refinancing is for. An adjustable-rate mortgage could backfire in trying economic circumstances – particularly if rates don’t decrease as quickly as we’d like. Similarly, avoid taking on unnecessary debt! Don’t cosign on someone else’s loan, keep your debt-to-income ratio in check, and manage existing debt wisely.

DON'T — Panic!

The word “recession” comes with an unpleasant knee-jerk reaction. We all know people who lost everything in the Great Recession. It’s natural to be afraid. Just don’t let that fear dominate your thoughts or actions. Making emotion-based investment decisions is always a poor choice. Even if you find yourself feeling fearful, don’t give in to panic. Fall back on the reliability of real numbers and objective analysis.


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Chris Clothier
Written by Chris Clothier

Entrepreneur, writer, speaker, ultra-endurance athlete, husband & father of five beautiful children. Chris puts these natural talents on display every day. As a partner at REI Nation, Chris addresses small and large audiences of real estate investors and business professionals nationwide several times each year. Chris is also an active writer, weekly publishing real estate, leadership, and endurance training articles.