What Property Investors Should Do With Recession Predictions
The world economy has been in a state of flux this year. Between the ups and downs of the stock market, a manufacturing slump, and the trade war with China, fears of a recession within the next year are not entirely unfounded. Do I need to even mention Brexit? Different sources and economists tend to disagree on whether or not a recession is in the future — after all, the stock market is back to record highs after last month’s big scare.
If you look to Bloomberg, the consensus is that a recession is not all that likely. They cite upward (and upbeat) indicators that have investors feeling more confident. They point to our strong labor force, our growth in consumption of goods, and a solid real estate market.
In the middle is CNN Business, who says that a recession is not off the table. They point to some of the same positive indicators that Bloomberg does while also speculating on the potential of a trade deal with China, unemployment rates, and retail sales. However, they also point out that over half of CFOs expect a recession to kick in before the 2020 election.
Due to the trade war with China, we would expect the manufacturing sector to fall into recession mode. We would think, according to CNN Business, that this is isolated due to a strong overall job market. Jobless rates remain low, but job growth has dropped from a peak of 1.9 percent to 1.4 percent (an eight-year low).
The data says that job growth is poised to slow even further.
The reality is that there will be a recession….However no one has a crystal ball.
3 Things Property Investors Should Do to Prepare for an Economic Recession
Consolidate Your Debts
A recession can create a lot of uncertainty and financial strain. Whether or not you expect to be impacted by a recession, it’s always a good idea to step back and assess your debts. You may only have “good debt” under your belt, but if you have credit card balances hanging around or other high-interest debts, now is the time to really focus on paying them off.
You don’t want to be stuck with the extra financial burden if we are faced with a recession.
Plan for Portfolio Growth
While no investment is recession-proof, buy-and-hold real estate investors have a massive advantage. Some of the closest things to a “recession-proof” investment are investments in single-family homes. These generate income for the owner with the intent to hold for a long time. Even if a recession causes a property to depreciate in value, the savvy real estate investor knows that this will not always be the case. In our niche in which we supply social HMOs and social buy to lets on 10 year contracts…no voids..no management and no maintenance, the possibility of protecting one’s net worth we feel is enhanced.
Prepare to See It Through
Our last bit of advice goes for everyone, but passive investors especially. Don’t panic. Other types of investors — in real estate and beyond — may find a recession greatly impacts them. These are the investors who depend on timing and a quick turnaround. For example, flippers may struggle as inventory stops moving and their investment sits on the market.
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