When it comes to real estate investing, there’s no such thing as being too prepared. In a turbulent economy, it’s more important than ever to have a solid game plan in place. That said, no one likes uncertainty, and it can be tough to stay focused when the market is constantly shifting. But don’t worry – we’re here to help!
This article will discuss five things you can do to survive (and thrive) during an economic downturn. So whether you’re just starting out as an investor or you’ve been in the game for years, these tips will help you stay ahead of the curve.
Savvy real estate investors understand that economic downturns come and go.
Needless to say, panic can cause a world of hurt for real estate investors, and it can have devastating long-term effects on their businesses.
To ensure your real estate business survives (and thrives) during a recession, you’ll need to stay calm and focus on your end game. You can do this by sticking to your original business plan and by memorizing your long-term business goals.
Barbara Corcoran, a savvy investor most known for her role as executive producer and star of Shark Tank, shares her advice on staying calm during economic hardship in this famous quote:
“A funny thing happens in real estate. When it comes back, it comes back up like gangbusters.”
Profits are no doubt important, but you’ll also want to consider the long-term value of your portfolio.
During economic turbulence, tracking your expenses and measuring your ROI becomes more important than ever. Tracking your expenses allows you to visually see what’s working and what’s not, as well as which costs you should cut back on first should you need to free up some funds.
With that said, it’s important to remember that there are some expenses that could devastate your business should you cut them. For example, if you cut out your marketing budget, your entire lead pipeline could come to a standstill.
While you might think you have plenty of leads in your pipeline today, cutting your marketing could, and likely will, have devastating effects on your business down the road. So, you’ll need to be extra smart about what you choose to cut out of your monthly budget during a recession.
(Experienced real estate investors view marketing as an investment, not an expense, and they profit from the marketing mistakes that inexperienced investors make. We explain why this is in-depth, as well as what you can do to avoid making business-crushing mistakes, in this article here.)
Fixed expenses include things like your mortgage payments, property taxes, interest, and insurance. These expenses are rarely in your control, and most likely can’t be cut. On the other hand, some variable expenses are within your control. Variable costs may include upgrades to your properties, the cost of contract labor, any commissions you might pay out, products and services you use, as well as raw materials.
For example, when it comes to variable expenses like upgrading a property during a recession, you’ll need to ensure you make your money back on any upgrades you do, along with a reasonable profit. This requires your understanding of what renters and home buyers are willing to pay for those upgrades in your market.
You’ll also want to measure the ROI on the services and labor you contract out to ensure you’re getting a positive return.
A non-financial-based ROI could be a product or service that saves you valuable time, enabling you to do more revenue-generating tasks. Certain products and services can also help reduce your stress burden, which should also be factored in when considering your ROI.
It’s easy to backslide into old habits during a recession when the market gets a little stagnant. This can result in missed opportunities and massive income losses.
For example, some investors may choose to work less during a recession, justifying this because they perceive the market as being “slow.” But when other investors are sleeping, it’s the best time for you to make your move.
Here are a few tips to avoid backsliding into your old habits:
Throughout history, great wealth has exchanged hands during times of great economic uncertainty. This means that there are opportunities to be found amidst the chaos. Your focus should be on running your current businesses well, building up capital reserves, and looking for new opportunities as they arise.
(We discuss some key opportunities you should keep an eye out for during a recession in this article here.)
As an investor, you need to be extra wise when it comes to managing both your personal and business money during a recession. This is because maintaining liquidity enables you more flexibility during economic downturns and affords you the ability to capitalize on unique investment opportunities when the timing is right.
Having available cash during a recession will enable you to seize real estate deals and even stock market opportunities that may come at the height of a recession when others are struggling to stay afloat. These opportunities could then turn into even more liquidity in the long run.
To maintain liquidity, you’ll need to put some sort of check and balance system in place for your spending. This could include:
In summary, a recession can be a time of great opportunity for real estate investors. By being prepared, investors can weather the storm of an economic downturn and come out ahead.
If you’d like help in building a recession-proof marketing plan for your real estate business, we’d love to help! Our team of expert coaches has helped hundreds of real estate investors and hybrid real estate agents across the country build sustainable lead generation systems that convert motivated sellers on a regular basis.
Book a free coaching call with us today to learn more!
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