If we’re in a recession or headed toward one, is it a good time to invest in real estate?
Actually, yes. And no. Let me give you 3 reasons why it’s still a great time to invest.
- Lower prices. Perhaps you’ve noticed that properties seem to be lingering on the market a bit longer, and that spring’s multiple offer frenzy has cooled. This isn’t the result of buyer’s no longer being interested in housing. In fact, it is almost entirely the result of higher interest rates making monthly payments too high for buyers to qualify for. This has resulted in sellers not only being willing to contribute toward a buyer’s closing costs, but also to either lower prices or accept less for the property.
- Less competition. With higher interest rates forcing would-be buyers out of the market, there are fewer buyers competing for the same property. This usually results in a duplex buyer being able to negotiate a better price or terms.
- Lower rates. The Federal Reserve’s current inclination to continue raising interest rates during what may be a recession is historically unique. During most recessions, the Federal Reserve lowers rates. If a true recession occurs, rather than just the fear of one, watch for the Fed to begin lowering interest rates.
- Refinance to create greater cash flow. If you buy a duplex now that cash flows imagine what it will do when you refinance once interest rates fall.
- Fewer people will be buying houses and renting instead. While current data suggest fewer people are forming new households and looking for a place to rent right now, the good news to investors is when they do, it’s more likely they will rent, not buy.
- Real estate never goes to zero. – Unlike stocks and crypto, real estate always has some value. It never goes to zero, making a pretty safe bet during economic uncertainty.
Cash-flowing properties are out there. Give me a call if you’d like to find one to add to your portfolio.