In short—yes, rental properties can help you immensely during a recession because real estate remains one of the safest ways to secure your finances.
While the stock market and even cryptocurrency have emerged as a preferred mode of investment in recent years, their frequent fluctuations have kept many investors at bay. Returns from these avenues might be high when the market permits, but the risks are also significantly high, making new investors apprehensive about them after encountering horror stories of people losing their money in minutes.
How can rental properties help you in a recession?
Rental properties can help you create wealth without relying on volatile market conditions. Property prices fluctuate during a recession; however, unless you lose the property in a hurricane or fire and don’t have insurance, your property will always give you a minimum return value on your investment, even during the most challenging times.
Home prices and property rent may go down when the market is tough. But, if the neighborhood develops and the amenities that your renters can enjoy improve, your property will also experience a significant rental appreciation over time.
In such cases, those who think long-term will wait for the property prices to come down to invest in a property. The property market had seen a rapid surge at the end of the pandemic, but like a tide and ebb, the euphoria around the market has significantly reduced.
That does not mean that the market will not rise again, and it will belong to those who made tough choices during the recession.
The next question, though, is how will you have the resources to invest in a property during the recession to begin with? It is difficult enough to get financing from a bank during the best of times. With personal finances and credit scores suffering a setback during a recession, getting a bank loan to invest in a property will be more complicated than ever.
How can hard money loans help during a recession?
Hard money lenders can provide you with the perfect solution to the problem. Unlike banks, they do not have a rigorous underwriting process to sanction you for the loan. They will only consider the property’s purchase price and relevant details to ensure that it is sufficient enough to cover the loan amount you have applied for, as the property will be collateral until you pay off the loan.
As such, you are good to go if you are confident about your finances and can make the monthly payments on time. Buy a property and rent it out, and by the time you have paid off the hard money loan within a few years, the market will start stabilizing itself.
Once you start getting the returns on investment through the rent you receive, the years of struggle in between will melt away, leaving your property unscathed and you in a position to start making profits again.
After all, people will always need a place to live and you can provide them that. If property prices rise during a recession, buyers will put off buying a property but will rent a place to stay instead. You can provide them with the option.
Of course, you need to plan your finances to the last penny as hard money loan interests are higher than bank interest rates, and you will have to pay off the loan within a couple of years. However, hard money lenders often have various loan programs to choose from and are flexible to work with.
Make sure you have a steady source of income before you diversify into real estate, but once you do, you will always have your property to fall back on, no matter how hard the market gets.
We are your lenders if you need quick financing with personalized services and favorable loan terms. We will offer customized financial solutions for your requirements, and with over three decades of experience, you can expect nothing but the best services from us.
Contact us today for a quick consult, and you can be on your way to acquiring premium real estate with ease.