You have probably heard it all over the news – Investors are spooked by a scenario known as the “inverted yield curve,” which occurs when the interest rates on short-term bonds are higher than the interest rates paid by long-term bonds. What it means is that people are so worried about the near-term future that they are piling into safer long-term investments. It is a phenomenon in the bond market in which longer-term interest rates fall below shorter-term interest rates, and has historically been a warning sign that a recession could be on the way. This widespread loss of confidence explains why inverted yield curves have proceeded every recession since 1956. The last inversion began in December 2005 and heralded the Great Recession, which officially began in December 2007. Then came the 2008 financial crisis. There was also an inversion before the tech bubble burst in 2001.
So what does that mean for Real Estate Investors?
Good things… hear us out.
Many peoples minds jump to the 2008 housing ‘crisis’ and immediately worry about losses, drops in value and worse but the reality is
if you make sure you are paying attention to the little things you can actually grow your real estate empire more rapidly during a recession.
Cash flow is king. Remember the brrr strategy we wrote about? This actually becomes easier during a market down turn. Refinancing rates become cheaper, and finding your next cashflow property may be easier to spot as well.
If your properties are cashflow positive the outside economy has little to no effect on your bottom line.
Where to focus buying in a recession
Stay away from new deveopments
I’m sure you’ve heard ‘buy low sell high’ don’t invest your money in new developments where demand has not yet been proven.
Rentals
Areas with proven demand will continue to be rentable even during the worst of economic down turns. In an economic downturn rentals are your friend, people need a place to stay and when money is tight there are generally even more renters in the market which actually may increase the rentability of your units. That being said, by having duplex’s and triplex’s you are hedging your bets when it comes to a potential vacancy.
Wholesalers
Skip the hassle of the middleman realtors and inflated home prices and buy what the house is actually worth. The best thing to do if you feel that the market is inflated is to insure you are getting a property at the best possible price. Check out our last blog on Why we wholesale.
Play the field.
The market is still red hot for sellers and rates are still extremely low for buyers, if you are a flipper there is no better time to strike than while the market is this hot.
So Is it time to get your money out of risky investments and into real estate? We are completely biased here.. but yes. View our current inventory: https://2ndwindproperties.com/property-catalog/
