Although it is nothing close to what it was during the 2008 crash, the real estate market isn’t exactly what one would consider a safe bet. Similar to a roller coaster, the real estate market is known for its twists and turns, for its periods of bliss and its periods of misery. Nothing is for certain, but crashes are. The question is, how can an investor, such as yourself, successfully survive them?
1) Purchase real estate that rents under the median
Instead of allowing the market to ambush your endeavours as a successful investor, you have to get one step ahead of it, Although buying the best property on the block would be choice, charging rent that’s higher than the median is fair in a healthy market, but as soon as it stumbles, so will you.
By buying property that rents under the median, you could sustain healthy occupancy rates, no matter what’s going on in the larger scope of the economy.
2) Be the best landlord
If as a landlord, you act like a brute or an oaf, tenants will only see you as a temporary option and as soon as an opportunity presents itself, they’ll split.
When you’re an understanding, sympathetic landlord who can successfully cooperate with tenants, deal with maintenance issues quickly and efficiently, and charge fair and affordable rent, then people are obviously going to weather market crashes with you. Therefore, you’ll be better prepared to survive any future crash.
3) Pay down mortgages
An essential question in the real estate is whether or not to invest into new properties or pay down on an existing mortgage. Despite the fact that there are differing views which apply to both, contemplate paying down property mortgages when possible. Thus, you’ll gain some headroom if you have face difficulties making payments during a market crash.
4) Maintain realistic cash flow numbers
When buying a new real estate, it is self-damaging to determine monthly cash flow by plugging in indefinite and unrealistic numbers. Do yourself a favor, and keep the numbers honest and realistic.
When the market crashes, and it will, and rental rates plummet, you’ll know that you have numbers to work with. If you’re liberal with your calculations, you’ll only be playing yourself.
In conclusion, financial diversification plays to your advantage. Purchasing real estate may be on one of the most appreciation-friendly and solid investments you can make, but it doesn’t mean you should put all your money on it. Disperse and diversify. Therefore, your risk stifles and your tolerance grows if the market were to go down.