Are we headed for a recession? Research from J.P. Morgan has raised the probability to 35% for a U.S. recession by the end of 2024, with unchanged odds at 45% for 2025. Those aren’t percentages to sneeze at. Even if a recession doesn’t come soon, it’s still on the horizon.

We don’t want that to be a source of fear. As traumatized as many of us were by the Great Recession, a recession doesn’t necessarily mean economic devastation. In fact, you may find that recessions provide some of the best opportunities for real estate investors.

What are the Tell-Tale Signs of Recession?

• Rising Unemployment
• GDP Decline
• Decreased Consumer Spending
• Interest Rate Increases
• Excessive Debt
• Stock Market Crashes

While recessions are typically seen as “bad,” they’re an essential and inevitable part of the economic cycle. Real estate investors are uniquely positioned to take advantage of recessions…benefitting their own wealth-building efforts and economic recovery for their investment markets.

Whether a recession comes sooner or later, preparing your investment strategy will allow you to fully embrace the unique benefits of this stage of the real estate cycle.

Further Reading: Find Investment Success at Every Stage of the Real Estate Cycle

7 Benefits of Investing in Real Estate During a Recession

Benefit #1 – Lower Property Prices

Property values often decline during a recession due to reduced demand and increased foreclosures. If you’ve been feeling burned by high property prices, a recession could bring you the reprieve you’ve been waiting for. Now, this isn’t a guarantee. It does hinge on other factors, such as pent-up demand. The real estate market is something of a Wild West right now! However, deals will be more likely during a recession.

Benefit #2 – Less Competition

Economic uncertainty typically causes many investors to hold back, reducing competition. This is where “fair weather” investors drop out. For those with capital and confidence, this can be an ideal time to acquire properties. It also helps to employ a buy-and-hold strategy, which encourages a long-term perspective that transcends market conditions versus short-term gains.

Benefit #3 – Motivated Sellers

In a recession, some property owners may be more motivated to sell due to financial stress. This can lead to better negotiating terms, such as lower prices or favorable financing. Motivated sellers are just more likely to play ball with negotiations. They’re trying to get while the getting’s good and feel the pressure to sell while they “still can.”

Benefit #4 – Better Financing Terms

Interest rates have been the real sticking point of the last few years. Signs point to a decline in rates. On the one hand, that may mean stricter lending standards, but it also means investors can reap the benefits of lower rates, whether they’re buying or refinancing. Just keep your debts on a tight leash to avoid over-leveraging.

Benefit #5 – Long-Term Gains

Real estate tends to recover over time. Investors who buy during a recession tend to benefit from the rebound. We saw this during the Great Recession. The real estate cycle is predictable, and real estate almost always follows the same patterns of ebb and flow. Aim for long-term gains, and you’ll see the opportunities in a recession.

Benefit #6 – Increased Rental Demand

Homeownership rates often decline during recessions. Not only can fewer people afford to buy thanks to higher unemployment rates, declining income, and increased debts, but foreclosures increase, too. Thus, rental demand goes up! This leads to increased rental income yields for investors.

Benefit #7 – Diversification Opportunities

Declining property prices create opportunities to buy more for less. These changes vary by market, making it a perfect time to capitalize on your diversification efforts. Look at different markets and see how they’re handling the recession. These will give you indicators as to who will come out on top. For example, the strength of the Houston economy made it one of the most lucrative investment markets of the 2010s. It continues to be incredibly strong, even now.

Here’s the fact of the matter: investors can find success at any stage of the market cycle. What matters is that you remain firmly aligned with your investment goals while learning how to adapt your strategy to best suit the economic environment.

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