Memphis Real Estate Investing

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What Savvy Investors Should Do With Recession Predictions

Wed, Sep 25, 2019

recessionpreparation-realestateinvestors-buyandholdThe U.S. economy has been in a state of flux this year. Between the yo-yo 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. 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.

In short, the U.S. economy is slowing down and doesn’t show any signs of changing course.

Then we look to MarketWatch’s opinion piece on the likelihood of a recession, which explains that two-thirds of corporate insiders are expecting a U.S. recession by the end of next year.

With all that said, it’s clear that there are murmurs of a potential recession in the future with some significant statistical data to support the claim. 

Even if we don’t know how the market will move, we can prepare ourselves for the potential of a recession. 

3 Things Real Estate 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. 

Be sure to check out: How to Conquer 4 Major Financial Fears Everyone Faces

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.

They recognize the cycle that the market moves in and acts accordingly. The Great Recession was an anomaly of recessions — we don’t expect the next recession to be as devastating or dramatic. (CNBC predicts that any recession would be “shallow”)

For real estate investors, a recession can be one of the best time to expand your portfolio. Whether or not it happens, speak to your Memphis Invest adviser about strategies for growing and diversifying your portfolio. 

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. 

Buy and hold investors, though? There’s no such timeline. We buy with the intent to hold — for years, for decades! And in the meantime, you have your passive income. Even if there are ups and downs in the market, you can always bide your time and wait for those idle moments to sell or swap properties.

There’s no rush. If you are well-prepared with a safety net and clear on your investment strategy, you will do just fine even when economic times get tough.

Pick an investment strategy that beats the odds. Invest in turnkey real estate with Memphis Invest.

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Chris Clothier
Written by Chris Clothier

Entrepreneur, writer, speaker, ultra-endurance athlete, husband & father of five beautiful children. Chris puts these natural talents on display every day. As a partner at Memphis Invest, Chris addresses small and large audiences of real estate investors and business professionals nationwide several times each year. Chris is also an active writer, weekly publishing real estate, leadership, and endurance training articles.

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