Is Buying Real Estate During a Recession a Smart Idea?

Real estate investing can be a smart way to build wealth over the long term, and it can be especially clever during a recession if you are prepared.

While the value of real estate may fluctuate in the short term, it has historically increased over the long term, making it a safe and lucrative investment. In addition, there are several specific reasons why investing in real estate during a recession can be a good idea.

One reason to consider real estate investing during a recession is affordability.

When the demand for housing decreases or in our current situation when mortgage rates prevent buyers from qualifying for that a higher price, prices will also decrease. This can create opportunities for investors to buy low and hold for the long term while prices go back up.

As I mentioned in the last paragraph, another benefit of investing in real estate during a recession is the strong potential for price appreciation. While the value of real estate may decrease in the short term, in Canada it has historically increased in the long term so it is important you approach investing in real estate from a minimum 5 – 10 year plan to ensure you come out in the positive.

When your property increases in value, this will provide the options of selling and cashing out your investment, or look at tapping into the equity using mortgage products like home equity lines of credits (HELOC) that can be used for a down payment on another investment property.

Another reason investing in real estate during a recession can be smart, is the potential for creating a steady stream of passive income. During a recession especially when prices for everything goes up, this can be an intelligent way to fight inflation by increasing your monthly income.

One of the best parts about investing in real estate compared to other types of investments like stocks, is while some people may be financially impacted by the recession and unable to buy a home, everyone still needs a place to live.

For this reason, unlike a lot of other types of businesses where they can suffer due to customers being unable to buy, you can always expect a steady stream of clients (renters) as everyone needs a place to live. So by investing in rental properties, investors can generate a steady stream of passive income if done properly. Schedule a call with us to see how we can make this happen for you.

During a recession, it’s common to see your stock portfolio take a massive hit like so many are seeing right now. Of course, as we mentioned earlier real estate is not protected from these drops in value, but if structured correctly using the tips we’ve mentioned above it can provide excellent diversification for any investment portfolio.

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Furthermore, if you manage to create a passive income from the rent you are charging that can be make it easier to ride the wave of property values dropping so you can wait for the economy to recover and for prices to go back up.

Adding real estate to a portfolio of stocks and bonds can potentially reduce overall risk and provide a hedge against market volatility.

It is important to note that real estate investing carries its own set of risks, and it is important for investors to carefully consider these before making any investment decisions. Some potential risks include the possibility of tenants defaulting on rent payments, property values decreasing, and the cost of repairs and maintenance.

However, with careful research and due diligence, the potential rewards of real estate investing during a recession can often outweigh the risks. By taking advantage of lower prices and speaking to your mortgage broker about creative financing options, investors can potentially build a solid foundation for long-term wealth.

Have questions about how to get started in real estate investing? Schedule a complimentary strategy session today!