Investing is a win-lose game, defined, above all, by the economy. Of course, we never really know in which direction the economy is headed. However, you can decide for better or worse depending on the quality of your decisions.
When can it be said that there is a recession?
In an economic downturn, such as the one we may be experiencing in the second half of 2022, investments generally suffer losses. GDP growth in the first quarter was below expectations, declining by 1.4%. If that trend continues through the end of the second quarter and we record another quarter of GDP decline, we are officially in a recession, by definition.
The current increase in interest rates, seeking to make citizens avoid spending and save, only delays the arrival of the recession a little.
So how should investors prepare?
With capital ready to take advantage of good opportunities.
People will start to appear who will want to sell because they see a recession coming, or because they can’t pay their debts and are forced to capitalize.
In addition, there is a large pent-up demand, which existed prior to Covid and has logically increased even more after it.
The strategy we recommend is to invest in real estate as a solid investment that always maintains its return value throughout history.
Real estate values have continued to rise despite numerous recessions over the past 60 years. Sometimes, they have increased during the recession itself.
Even in the Great Depression, investors gained a lot in real estate stocks in particular.
But why is this the case and what does this mean for you as a rental or resale property owner? What can you do to benefit from buying investment property?
Let’s talk about it.
Why is it attractive to buy an investment property even in bad economies?
Real estate is one of the most stable investments when the economy is plummeting. Rental housing generally serves as a natural hedge in market volatility. This is primarily because homeownership rates suffer a drop during economic downturns such as recessions.
As a result, landlords become tenants, which generates a greater demand for rental properties in such situations. If the economic downturn is accompanied by an early drop in real estate market values, which is often the case, there is the possibility that there may be a short period of time when you can buy properties at a discounted price.
By deciding according to what we have learned over time in real estate and not paying attention to feelings, you can make informed decisions, buy a property with good cash flow and make a profit, before and during a recession.
Housing is always a basic need.
When an economic downturn hits, people lose their jobs, income and, potentially, their homes. During these periods, it can be very easy to find tenants. Housing is a basic need, and there is always a demand for housing. We may put off buying a phone or a new car, but it would be rare to find someone who voluntarily decides to live on the street.
You will have no problem finding tenants if your rental property is not neglected. Proper management of your properties and buying your home in an excellent location are crucial to maximize the benefits of your investment property.
Residential real estate over commercial real estate offers comfort during recessions.
You might think that commercial real estate is more reliable than residential real estate. After all, some companies have survived a series of economic downturns, so they are experienced enough to stay afloat.
But if our experience with COVID-19 tells us anything, commercial real estate is not as simple as it seems. Many businesses closed, old and new, either by economics or by force. We are in an interesting place and must consider the external threats to commercial real estate right now, such as supply chain issues and the rising cost of gasoline.
On the other hand, residential homes are not subject to the economics of business and the global economy. People need a place to live, regardless of what is happening in the world.
At Your Real Investmentfrom experience, studies and success of our clients, we know that real estate is the ideal refuge for your capital at all times.
And if the situation does not provide security, the properties do.
Come to us. Contact us.
We will give you peace of mind and confidence, informing you of all the necessary details so that you can be an investor who sees your savings safe and growing.
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