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Creating a low-risk real estate investment portfolio during a recession

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The National Bureau of Economic Research announced last June that the US is officially in a recession. As we enter the last quarter of 2020, it remains uncertain how severe this economic contraction will be.

Given the unstable economic climate, more industries are bound to tighten their belts as they prepare for more difficult times.

But there is some good news.

Real estate has maintained its resilience despite Covid-19. Record-low interest and mortgage rates are fueling buyer demand. Moreover, the industry as a whole is adapting quite well to safety and physical distancing protocols.

In real estate investing, it’s still prudent to remain cautious. That’s why building a low-risk investment portfolio is a wise move during this unprecedented time. Here are a few suggestions on how you can do that.

Make long-term residential leases the default option

Generating steady cash flow is one of the major goals you should set out to achieve. Signing long-term leases will help you make that happen.

With or without a pandemic, demand for residential property will always be there because people need a place to live.

Set at least six months as a minimum. Check market prices and offer competitive rental rates if you’re having some difficulty marketing to potential tenants.

Improve efforts to retain tenants

If you’re facing the prospect of turnover in a number of your properties, prioritize tenant retention.

With an ongoing pandemic and a relatively uncertain economic outlook,
it can be incredibly costly if you don’t renew a number of lease contracts. It’ll be in your best interest to do what you can to keep tenants longer.

You could, for instance, offer monetary or non-monetary incentives to encourage them to renew (e.g. discounts, newly lighting fixtures, upgraded rooms). Additionally, don’t skimp on important maintenance work and keep lines of communication open.

Look for potential investments in the best locations

Veteran investors know that lucrative opportunities still present themselves in a recession. If you look in the right places, you could bag real estate properties in highly valuable markets at unusually low price points.

Some investors often overstretch themselves prior to a recession. To cut their losses, a number of them will sell off their properties at affordable rates. Now is a good time to look for those types of opportunities and find a prime real estate location.

Keep multi-family homes on your radar

Looking at overall commercial real estate trends, demand for multi-family homes mostly remains stable – even during a recession.

And as the pandemic continues to keep us inside our homes, potential buyers will be looking to secure large houses with lots of rooms and amenities. All that extra space will give people added comfort and flexibility when staying indoors and working from home.

With over 30 years in the real estate industry, we know what it takes to make your real estate investments recession-proof. Let our team at the Cardinal Realty Groupoup be your guide in this new normal. Call us at 636.225.0385 or send us an email at Hal(at)CardinalRealtyGroup(dotted)com.