If you have watched the news at all lately, you likely know of increasing talk of the likelihood of a recession within the next year or two. While that idea brings anxiety to many people, this can be a boon for real estate buyers. Why? A recession’s shrinking prices and changing housing market brings opportunity for those in the right position.
What kind of real estate opportunities should you look for both before and during a recession? Here are a few of the best.
1. Your Dream Home
If you put yourself in a good financial position as a recession starts — reducing debt, increasing stable income, and keeping a good budget, for example — a market downturn is when you can get a great deal on your own new home. Prices for modest and larger homes usually drop as people decide to (or must) sell and as other buyers stay out of the market. This is your chance to scoop up a great home while others sit it out.
2. A Rental Unit
Have you thought about earning a side income through renting? A recession provides the best opportunity that most landlords will find. You have two reasons for this. First, a slow housing market is a buyer’s market, and this allows you to get a better property for a lower price.
Secondly, the recession itself generally causes more people to rent instead of buy. That translates into a larger pool of potential tenants and renters that are often more attractive because they have higher income and more stability than the average long-term renter does. These people normally buy their own homes but will be in the rental market for at least several years.
3. A Duplex
Duplexes provide the best of both worlds for small landlords. A duplex is a single-family home divided into two (or occasionally three) smaller units within its floor plan. Most duplexes feature mirror-image units that are equal and opposite, a shared driveway and yard, and separate garages. The owner can live in one unit and rent out the other half.
Duplexes have great appeal for recession buyers. You get a stable home that you yourself can live in. The other half of the property provides rental income that you then use to pay for the shared housing expenses like mortgage, taxes, and insurance. And since duplexes (or triplexes) are modestly sized rental units, they tend to fare better than larger rental homes when people downsize.
4. A Long-Term Investment Property
Recessions can be tricky for house flippers if the buying market is not very hot. But if you are willing to sit on an investment home for a few years, you could make a pretty penny in the long term.
How long might you want to sit on a property to make a sizable profit? Recessions vary, of course, but historically they have lasted between a year and four years — usually on the shorter end of those statistics. Then, recovery will pick up and prices will start to rise. Each individual market will determine how quickly prices rise and when will be a good time to recoup your investment.
If a recession is in the cards, is this the right time to start looking for the right property? No matter whether you want to buy your dream home, find a new source of income, or start a long-term investment, real estate is often one of the best choices out there. At Charles L. Moles Real Estate LLC, we can help. Call today to make an appointment to learn more or ask any questions you have.