There has been quite a bit of talk about the economic condition of the US over the last few months.
- Could a recession put you at risk?
- Could you be facing financial turmoil?
Recessions may mean changes for your rental property business, but that does not mean it is time to pull out of this business model.
The first step in maintaining a good rental business in tougher times is knowing what to expect. While there is no way to predict an economic recession, there are some things to consider when it comes to the 'big picture' of investing, like knowing how to prepare for disaster scenarios. Keep in mind that you don't have to do this alone, either: a Columbia property management company can guide you!
Recessions don't always significantly impact the housing market in a negative way! People tend to react this way because the last recession in 2008 mainly focused on the housing market (especially concerning foreclosures), so they assume the same will hold for every recession. However, a major housing downturn is not always a component of recessions. Various reports, such as those from First American Financial Services, have long suggested that a recession would not likely impact the housing market significantly without first satisfying several market red flags that we haven't seen in the current recession.
Current residential property holdings in the US are worth around $35 trillion, according to The Economist. As of July, the housing market was holding steady in most areas of the nation—and even accelerating in others! Residential real estate is likely to continue being an investor's safe harbor throughout the recession we find ourselves in now, and may even provide cash-ready investors a chance to grow.
However, to take advantage of this potential, you need to prepare your portfolio to weather just about any storm with some foundational elements in place. Consider the following tips from the Columbia property management experts at Renters Warehouse to get prepping!
Have a Contingency Plan
There are certain situations that can quickly put investors into dire financial straits if they find themselves unprepared to address them. Consider this: since the 1990s (barring the sudden and dramatic drops during the 2008 Housing Crisis), home values have grown over time. The assets you own now are likely to continue to build value over time, making buy-and-hold investing through rental property an ideal opportunity to gain reliable income while cashing in on future appreciation when you decide to retire!
At the same time, you may need a contingency plan to protect your current economic engine: rent. This may mean looking at freezing rental income increases for a few years or being a bit more aggressive in your marketing to bring in residents. It also means having a plan in place to address what to do if your renters find themselves unable to pay rent due to job loss or some other crisis. Of course, the advantage of working with Columbia property management is that they can help you make those decisions using their market expertise!
Take Advantage of Opportunities
There is some evidence, according to Zillow, that home prices may start to dip in the short term. A report from June 2020 shows that home value growth is not backsliding quite yet, but it is slowing. That could mean now is a good time for you to think about expanding your portfolio!
Many of today’s rental property owners will find home price drops are the perfect opportunity to adjust their business model. Could you take on a bit more property now? If so, that could mean bigger returns down the line! However, you should always have your property management partners at Renters Warehouse check out any potential rental you're interested in investing in first using our free rental price analysis tools.
Be Proactive Instead of Reactive
Know what you are facing, and be ready before you need to react. This is another crucial part of being prepared for a change in the residential rental sector this year. For example, here are a few things we know about the 2020 housing market:
- Home supply remains short: Demand for homes—including single-family rental properties—is high in many areas.
- More incentive to sell: Often, in tough times, people have to sell the homes they own. They become more dependent on Rent Estate™, which means you have an opportunity to increase your 'client base!'
- Lending standards have tightened: Those who were ready to purchase a home suddenly found themselves 'priced out' of the market due to their credit score in the wake of reactive lending restrictions. This means many would-be homeowners have turned back to renting for the time being, which is an opportunity for confirmed income.
Preparing for a potential increase in active rental applicants means tightening up your renter screening practices to ensure that you place the right people into your properties whenever you find yourself with a vacancy. Now is not the time to react to market pressures and let 'just' anyone through the door!
You Are Not in This Alone
This is perhaps the biggest secret to doing well in a recession! Working with the right partner can support and guide you towards growing your business and making the right investing decisions during this time. The benefits of hiring a property management company are numerous:
- Managing resident screening
- Reducing vacancies
- Improving communications
- Guiding you in rent decisions
- Reducing legal risks.
Why not take advantage of those benefits? During a recession, your time is even more critical than it was. Having a team to guide you really can make all of the difference in the long term.
Are You Struggling to Stay on Top of Your Goals?
It’s not easy to meet your goals as a rental property owner during the height of a recession! However, at Renters Warehouse, we don't believe you should have to give up on your financial freedom just because the 'going got tough!' Work with Renters Warehouse BW Metro as your Columbia property management expert! We can handle the hard work and keep you profitable and successful during times like these.
One of the most crucial ways in which we help you do this is our professional approach to rent collection. If you're self-managing your rental properties, you can learn more with our Collecting Rent in a Crisis Handbook!