It seems like it was only yesterday that I was debating whether I was going to buy investment property or not. I’d grown tired of the nine-to-five grind that left me too exhausted to spend time with family or enjoy my favorite hobbies. Planning how I was going to get to another rung on the corporate ladder gave way to dreaming about how I could start investing in local real estate. When layoffs started happening around the country, and at my company, turning those dreams into a reality became a priority.
You may think that investing in real estate during a recession is a risky proposition—and, to some degree, you’d be right. But, the risks of investing in residential property can be overcome, even when times are hard. Trust me, I know first hand. And, since there is no time like the present to finally take your dreams off hold, I’ll give you some tips on how you can start buying and renovating homes to rent or sell today.
How to Start Real Estate Investing During a Recession
As we delve into the details of how you can get a real estate investing career started during a recession—or anytime, really—I want to make a quick point about mindset. There are a lot of benefits to investing in real estate that, when kept at the forefront of your focus, can keep you going even when the going gets tough. So, don’t lose sight of why you’re switching careers, whether it’s to expand your income potential or your ability to spend quality time with the family. Make no mistake: a good why can make every how doable.
And, here’s what you should do to start investing in real estate when the time is right for you:
1. Get an education from a reputable and established company.
These days, you can find real estate investment classes,workshops, and weekend seminars everywhere. Picking from among your options can be overwhelming. But, because you need to learn all aspects of the business, from knowing how to spot a good deal to how to keep a rehab under budget, making the extra effort to choose wisely is critical.
Strive to find a company with a long-standing reputation for providing training that works in the real world—and during all market conditions. Courses should be taught by active real estate investors and the program’s alumni should be out buying investment homes, too. The company itself should also be well established. In fact, the longer they, and their students, have been in business, the better your education—and career prospects—will be.
2. Hire a mentor who has seen it all.
Having a mentor on hand through good markets and bad can help you ride out economic transitions and, frankly, make more strategic choices. For example, if you’ve changed your mind about a deal when it may, technically, be too late, a mentor may help you pivot so that you have a chance to stay in the green. At the very least, getting feedback from an experienced investor will always be a better option than giving in to panic. So, get another set of experienced eyes on your real estate investing deals—especially during a recession.
3. Get to know your individual market.
What’s happening on a national scale isn’t always reflected in local markets. Even when it is, there is still usually room for nuance. It’s up to you to zoom in on what’s happening locally and also to keep up as things change.
For example, it wasn’t that long ago that Chicago, Detroit, and Atlanta were the hotspots for buying, rehabbing, and selling houses. But, because rents remained somewhat affordable compared to homeownership, renter populations also stayed strong. When home buying wanes, as they tend to do during recessions, cities like these may become especially great places for investing in real estate rentals.
By focusing on how your local market is faring, you’ll know how to best serve your community’s housing needs—and with what exit strategy you’re likely to make potentially good returns.
4. Equip yourself with a great tool that ensures you buy at a good price.
Particularly when times are tough, you’ve got to be savvy about all of the choices your make. And, when you’re buying houses to renovate and sell or hold, there’s little room for error when you make the property owner an offer. You’ve also got to make sure you rehab and sell or rent at the right price—and the only way to do that is to correctly calculate the numbers. Accurate real estate investment analysis and valuation is critical at all times. But, if you want to sell your rehabbed house later or realize a good cap rate on a rental, you cannot overspend during a recession.
5. Align yourself with a solid network of pros.
You’ll need a number of people in your corner to help you move on deals quickly, especially if investor competition starts to increase—as it can during a recession. From a way to get a hard money loan fast so you can close on a house to a way to quickly check a home’s title to ensure that it’s clear, you’ll need a network of reputable pros to lean on. It’ll help you to be surrounded by more accomplished real estate investors, too. Not only can they make recommendations for finding qualified pros, but they can also offer guidance and support throughout your career. And, it’s not a bad idea to get your team in place before you make an offer on that first house.
6. Generate qualified leads that are likely to close.
During recessions, the number of distressed homeowners tends to rise as more people become unemployed or burdened with extra bills. Without dependable funds to pay the mortgage or perform any repairs, the home lives of families can fall apart and many people lose their houses.
It can be tempting to set your sights on buying foreclosure auction homes when this happens or to purchase lead lists with the names of people struggling to pay their loans. But, the fact remains that the best source of qualified leads in any economy will always come from the homeowners themselves. When they reach out it’s because they want help sooner rather than later and that usually means the deal is more likely to close—and benefit you both.
The trick, of course, is knowing how to market to distressed homeowners effectively before things go from bad to worse. Your best bet for doing that is employing a marketing strategy, like HomeVestors®’ “We Buy Ugly Houses®” ad campaign, that’s already proven over the years—and during all economic conditions—to work.
7. Evaluate the house carefully.
When investing in real estate during a recession, what you look for in a house changes slightly since a lot of home buyers are squeezed and the rest tend to carefully weigh their options. Luxury housing, for example, will attract fewer qualified buyers. And, you’ll have a hard time selling any home that’s near railroad tracks, electrical lines, or the freeway—no matter how well it’s been rehabbed or how modestly priced. Instead, go for more traditional houses in neighborhoods that are attractive. Leave the house next to the gas station alone, or you may not ever find yourself a buyer.
8. Have a fast exit plan.
It’s also critical that you work to sell the house quickly, which
means you can’t work too long or hard on the renovation. Unless your plan is to rent down the line to a tenant, it’s not worth the risk betting on an uncertain future market. Hold off on buying major fixers or performing extensive, and unnecessary, upgrades. In a recession, any repairs that take a big bite out of your time can end up swallowing your potential profits—if your intention is to sell the house in the same market you bought in.
9. Maintain flexibility in your investment strategies.
Recessions make great times to create diversification in your real estate portfolio and to be open to investment strategies you might not have otherwise considered. Homes you would have previously bought to strictly rehab and sell can be turned into rentals until the economy strengthens—and there’s an influx of new buyers.
If it’s multi-family properties you were leaning towards buying, still keep your eye out for single-family homes that are good deals. After all, there will be some people who can buy a house, especially as interest rates drop. And, there will be some areas that are hit harder than others. Though you may not have considered buying there in the past, now may be the time to get a great deal and, ultimately, turn a hard-hit neighborhood around.
There are many different ways to think outside of the box when it comes to investing in real estate. And, as any investor who has come out ahead in a recession will tell you, strategic flexibility is the key to survival.
As you start taking steps towards your new career, I want you to keep something else in mind, too. Tackling things alone can be tough, whether you’re investing in real estate in a recession economy or not. Starting a real estate investing company from scratch is no exception. But, by joining a team that’s seen every kind of market there is, and that knows what it takes to get and stay strong, your chances of getting off to a good start will be better-than-average—in any economy.
Weather Market Ups and Downs by Joining a Tried and True Investing Team
Real estate investing during a recession is no easy feat—and, quite honestly, it can feel scary. Just over ten years ago when I took the leap, I didn’t know how well things would or wouldn’t turn out. But, because I no longer felt safe at what I thought was a dependable corporate job, it seemed like a bigger risk not to try my hand at investing at all.
Still, I didn’t jump into real estate investing without looking at where I was going and how I could mitigate the risk of switching careers. What I found was that, by becoming a HomeVestors® independently owned and operated franchisee, I’d gain access to the very tools and resources that would help me weather an economic storm—as well as normal market ups and downs.
As a franchisee, you receive extensive training as well as one-on-one mentoring from your own Development Agent. You gain access to industry-leading tools, like the valuation software, ValueChekTM, and the “We Buy Ugly Houses®” ad campaign that drives distressed homeowners to you. You get a network of regional franchisees you can call on anytime and access to experts that want to work with you because you’re with HomeVestors.
More than that, you get a franchise behind you that’s been through it all and has been able to maintain solid footing for years. Since 1996, the HomeVestors team has been going strong. And, franchisees across 47 states have purchased more than 110,000 homes. That’s not to say you don’t have to work hard. But, you’re less likely to get laid off when you are your own boss.
Invest in your future by joining the team that knows how to come out ahead, even when economies take a dip. Request more information from HomeVestors today because franchise opportunities in your area could be gone tomorrow.