“So, now what happens?” Like everyone these days, that’s the question all the real estate investors I talk to have on their minds. But unlike most people, we have an answer, at least for what we can do. We invest. We put money into the community. We can be optimistic, because we know that this market provides opportunities, for ourselves and the future of our communities.
In these times, one of the best ways to take care of those around you is with real estate investing, which has a higher potential upside and less risk than the plummeting stock market. But, during a recession, you have to invest in distressed houses smartly—not in fear or overconfidence, but with a full toolbelt and knowledge. Let me walk you through how to invest in a recession with more certainty.
Why Invest in Real Estate During a Recession
I understand why it might seem counterintuitive to think about investing in real estate right now. After all, in the last recession, real estate was a millstone that seemed to drag the rest of the economy down with it. It is true that the 2007-2008 crash started with the housing market—or, more accurately, incredibly complex investment strategies far removed from the lives of homeowners. But, as painful as that was, there were silver linings for real estate investors. We were able to acquire houses and sell them when the economy came back.
And, we know that this time, there will be an economic recovery. Experts debate whether it will be “V-shaped” quick recovery or a “U-Shaped” slower one, but businesses will reopen and people will be rehired, even if the way we work will be different. So, people will be looking toward homeownership again. The real estate market, which isn’t the epicenter of this recession, will most likely rebound quicker than most.
What You Need To Know About Investing in Real Estate Right Now
The first thing anyone needs to know about investing in real estate—especially during a recession—is that, like nearly all forms of investing, there are no guarantees. You can lose money doing this, even if you’re smart and know what you’re doing. But, if you do things correctly, you will have a better chance of coming out ahead.
That means doing your homework. Right now, given 2nd and 3rd-quarter projections, there will be a lot of homeowners either losing their house outright or making the decision to sell before they do. The latter group is the key demographic here because we have the best opportunity to help them out of an “ugly” situation.
This is a group feeling the burden of owning a house on an unexpectedly tighter budget and will be looking to get out of their financial distress. They will be seeking a quick cash sale. And, that’s where an investor, like me or you, can come in. We can offer that cash and provide the homeowner a lifeline before the bank gets involved and makes the situation more complicated with foreclosure proceedings.
But, you’ll need a good way to get quality leads on distressed houses. There’s several places you might want to look, but some are better than others. Here’s a few, along with their pros and cons.
➡ Pro: As unemployment rocks the economy, you’ll find a lot more foreclosures on the
market. It will be easy pickings, or so it will seem.
⬢ Con: Buying from sheriff sales or auctions brings a lot of red tape and unknowns.
You’d be closing a deal on a house that you likely won’t even be allowed to see the inside of to gauge its condition and may be encumbered by unknown liens. Despite this, you can also expect a lot of competition. The banks themselves often bid on the very houses they foreclosed on if they think the house can be sold for more after the auction. Put simply, buying foreclosed homes as investment property is risky at best.
➡ Pro: You can find a lot of houses on Craigslist. And, in the coming months, there’s
likely to be even more. This presents an opportunity to work directly with a motivated
⬢ Con: You’ll find a lot of scammers, even in the best of times. But, even genuine
homeowners may not yet be serious about selling. Often, they are just testing the market
by posting on Craigslist. At best, that’s a waste of your time to sift through.
➡ Pro: You are probably spending more time online these days anyway—why not check
out the listings on Zillow? It’s accessible and easy to use, right?
⬢ Con: Only do this if you have way too much time on your hands right now. For one
thing, Zillow’s data can be wildly inaccurate. If you find a ‘for sale by owner’ listed, the
price is likely to be inflated because the homeowner checked Zillow’s outdated
valuations and set their expectations. Even worse, every other bored real estate
investor out there will be looking at Zillow, too, and that spells higher competition—and prices.
To effectively invest in real estate during a recession, you’ll need a way to market directly to distressed homeowners and get their attention before all the other investors. It’s even better if you can get those leads to come directly to you.
Once you find a real estate investment opportunity, you’ll have to know if the lead is the right house for an investment. You’ll want to get some expert training before diving in because this is the part that most new investors make expensive mistakes. But, to get you started thinking about your investment approach, here are a few tips that are especially important to keep in mind when buying real estate investments during a recession.
• Avoid “white elephants.” If a house is cheap, there’s probably a reason. If you explore the neighborhood, you might find the house is situated near railroad tracks or an electrical tower—both undesirable elements for home seekers. You can’t buy a cheap house, add a master bathroom, and double the price. You have to understand how to properly valuate a potential investment and when the market will support your target sale price. Again, that takes training and experience.
• Don’t take on a big rehab. You might think that adding a bunch of bathrooms and a pool is going to juice your return, but you don’t know when people are going to be able to or even want to buy at that price point. And, then you’re holding onto a house into which you just poured a ton of money.
• Set a quick exit strategy. You’ll want to avoid holding onto a property for a long time because you want to sell in the same market you bought in. This reduces uncertainty and helps you plan for the future.
Now, all of this is complicated in a normal, stable market. It’s even complicated for someone like me who has been doing this for a long time, in good and bad markets. But, there are ways to get the right training, leads, and support to reduce your uncertainty.
How To Invest in Real Estate With More Certainty
When the market crashed in 2008, I took a hit. I had been doing well but didn’t have much of an anchor. I got through it and came out ahead—because I made the smartest investment of my career: I became an independently owned and operated HomeVestors® franchisee. That changed everything.
I got access to a pipeline of qualified leads. See, HomeVestors has been around since 1996 and everyone has seen the nationally-known and trusted “We Buy Ugly Homes®” billboards and ads. So, when distressed homeowners need to sell fast—and many will be during this recession—they call me.
And, from there, I know exactly how to approach a homeowner facing foreclosure with a fair offer because I got the benefits of training and mentorship. Every franchisee receives a comprehensive one-week training program as well as personal mentorship from a Development Agent. Having a seasoned hand to guide you can make all the difference—for you and your community— when investing in uncertain times.
Nothing is a sure thing, especially not right now. But, the key to investing in real estate during a recession with more certainty is to get training, tools, and support from a national brand that has weathered all the economic storms—and come out ahead. If you’re interested in joining a winning real estate investment franchise, request information today.
Each franchise office is independently owned and operated.
HomeVestors of America® is the nation’s only real estate investing franchise, providing business opportunities to real estate and investment professionals across the nation.