3 REASONS TO INVEST IN REAL ESTATE DURING A RECESSION
In a period of recession, the real estate sector can stabilize the portfolio of
securities in a country's economy.
Before talking about the benefits of investing
in real estate during a crisis, we must understand what the value of investments
in a portfolio is during a recession.
According to Mihal Gartenberg, an agent at
Warburg Realty, he says, “When the stock market works well, prices tend to rise
as investors own more capital. When the stock market malfunctions, investors find
real estate a safe haven when looking for new opportunities”.
In summary, when the economy slows down investing in real estate is an opportunity to see your
capital grow.According to Gartenberg, incorrect assumptions about property prices and
recessionary periods can prevent investors from seeking a real estate investment, whether
it be a trust or buying rental property. According to Jim Egan, head of commercial real
estate banking and senior vice president at the Bryn Mawr Trust, a recession indicates a good
time to invest in real estate. Falling asset prices create a market for big consumers if other
investors think they need to sell them. "An investment in a real estate investment trust
is an alternative that involves less capital and can add diversification to your portfolio.
"Here are the top 3 reasons to invest in real estate when the stock market moves slowly:
- Investments can produce stable income
- Real estate tends to be less sensitive to volatility
- Property can outperform stocks and bonds
Investments create stable income Generating income is one of the main reasons to consider making
real estate investments. Real estate investment trusts can create dividend income.
The property allows investors to earn rental income directly. As a stream of income, investing in real
estate tends to provide predictability in a recession. According to Jason Laux, owner and
retirement advisor to the Synergy Group in White Oak Pennsylvania, Laux is looking for rental
properties because tenants don't fluctuate in a period of recession.
"Your monthly rent payment is always due and not tied to the stock market," he says.
Increasing the rent on lease renewals allows investors to stay up-to-date with rising
prices associated with inflation.
This asset class may offer more flexibility than stocks and bonds in a recession. Real estate is often
less sensitive to volatility" Even in times of recession, people need places to live, work,
and get services so the market always exists," says Diana Hill, director of real estate education
for OTA Real Estate. He also adds that one of the main characteristics of real estate investment
is its slower nature to move.
"The value on paper can change, but the value, relative to annual
income, does not tend to vary as fast," she says. The real estate sector is not completely immune
to volatility. Proof of this was the financial crisis of 2008 and the following recession in the
real estate market. But volatility risk management has to do with the strategy of investing in real
estate in an economic downturn. Industrial, retail, and office space can be riskier compared
to single-family, storage, and multi-family rental assets that historically have lasted longer
in recessionary periods. Property can outperform stocks and bonds Rule that every investment
should know “Past performance is not a guarantee of future performance.
But real estate could be profitable when the economy moves into recession if
stocks and bonds fail. Retail business space may present a higher downside risk
compared to multi-family homes and apartment buildings.
According to Joseph Polakovic, owner and CEO of Castke West financial in San Diego, "If your
investment model depends on appreciation, then the recession will be a difficult time as home
prices will fall."
The sweet spot for Polakovic would be a real estate investment with good neighborhoods and
good jobs."Real estate tends to be a better hedge for inflation than bonds,
especially in this environment of low interest rates."
In short, a recession can open up opportunities to invest in real estate.
Doing it wisely will mean managing the balance between supply and demand.