INVESTMENT STRATEGY
RECESSION PROTECTIONS
4 Ways to Protect Your Investment in Recessionary Times FOLLOWING THESE TIPS WILL GIVE YOU PEACE OF MIND AS WELL AS LEVERAGE FOR FUTURE OPPORTUNITIES.
by Arianne Lemire
s Warren Buffet said, “The first rule of an investment is don’t
At times, the values rose much faster than the cashflow the assets provided. Unfortunately, that has caused some newer investors to think values just continue to go up and that’s how you make money investing. More experienced investors know that the most stable source of income from real estate is it’s cashflow. Cashflow ultimately comes from having strong and sound operations. What systems and processes do you use for your properties? Do you have an efficient system for leasing units? How about your system for turning units between one resident to the next? These seemingly boring day-to-day questions are what makes or breaks your cashflow. Make sure to tighten and strengthen operations right now, so even if the economy gets a little worse, you are well-positioned to capture all the income you can. 3. INVEST IN AREAS WITH POPULATION GROWTH AND JOB GROWTH Real estate prices and rent prices are affected by supply and demand.
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1. MAINTAIN A HEALTHY LEVEL OF LIQUIDITY Investors and business owners are at risk of losing their investment when they run out of cash or liquidity to pay their necessary expenses and debt payments. You could have the best investment in the world, but if you don’t have enough cash in the bank to sustain operations during a few turbu- lent months, you’ll be in trouble. Strive to maintain a “safety net” of at least 6-12 months for your personal expenses in cash or a similarly liquid (easily convertible to cash) account like a line of credit. And aim for enough cash or liquidity to maintain 3-12 months of expenses for each of your businesses and real estate investments. If you can do that, you won’t need to worry if you face a situation like what happened in March 2020, when income was delayed for a while. Instead, you can calmly assess the situation and make the necessary adjustments because you have a safety net in place. 2. STRENGTHEN OPERATIONS A lot of money has been printed during the last two years, causing asset values to rise extremely fast.
lose money. And the second rule of an investment is don’t forget the first rule.” The financial markets are in distress. Stock market values are down significantly year to date. Cryptocurrency values are down even more. Everyone is talking about how stressful times are with gas and food prices so high. In times like these, investors are wise to include hard assets in their investment portfolio, because they typically hold sustained value during the most turbulent markets. Real estate, especially residential real estate, whether single- or multifamily, is one of the most tried-and-true investment vehicles. Housing is a basic human need, after all. When 100% of the popu- lation needs—not wants—your asset, there is significant pricing and staying power. Even though real estate holds intrinsic value, we still need to be vigilant in how we invest, so we don’t lose money. Here are four considerations for protecting your investment even in recessionary times.
12 | think realty magazine :: september - october 2022
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