Why Real Estate is a Great Investment During Emergencies

Wednesday, April 8, 2020, 6:00 AM | Leave Comment

As an investment, real estate is a solid asset – there is always a demand for it, it’s versatile and can be rented out or flipped, and you can expect phenomenal returns if timed right.

And even during periods of economic uncertainty, real estate manages to ride out the worst.

If you need more reasons to get into real estate, here are a few:

Why Real Estate is a Great Investment During Emergencies

  • Low Cost

    During emergencies, people are scrambling to liquidate their assets and hoard as much cash as possible. This is why homeowners and sellers are more likely to entertain lower offers. There is less resistance during recessionary periods and the scales are tipped in favor of buyers who have the cash to spend. If you’ve ever been interested in investing, a recession is a good time to jump into the market.

  • Lower Market Volatility

    Stock market volatility can easily wipe out investor capital with wide and unpredictable swings. This gets especially worse during the recession. Real estate, on the other hand, enjoys low volatility in different market cycles. It also maintains a relatively low correlation with the wild swings of the stock market.

    Even in times of worry, people need a roof over their heads or a place to do business in. This creates a perpetual need for the market. That being said, real estate is not invulnerable to volatility and the economic conditions that cause it. A good example is the 2008 financial crisis that caused the housing market to nosedive. However, volatility risk in real estate is more manageable as price swings are usually slower to happen.

  • Able to Outperform Traditional Investment Vehicles

    People love investing in stocks and bonds – it’s familiar, historically proven to be profitable, variations are endless, and the markets are relatively easy to understand. While historic data doesn’t guarantee future performance, real estate has been shown to generate returns during periods of economic crisis when stocks and bonds are dropping.

    The type of property and location will be key factors in determining risk vs return. Historically speaking, there is a wide range of possible outcomes in terms of performance. Commercial spaces, for instance, tend to be lower risk compared to multi-family homes and apartment rental units. Ultimately, ROI will depend mainly on the investment strategy you use.

  • Stable Source of Income

    Real estate investments can produce a reliable source of passive income, which is difficult to find during tough economic times. Yield consistency is what makes properties a good place to park your capital when everything else is unpredictable.

    Although housing prices can drop when markets are fragile and investors are scared, the income you generate from rental properties will still be coming in every month. Rent payments in recessionary periods remain reliable, according to a retirement advisor and expert at Synergy Group in Pennsylvania.

  • Secure Living Conditions

    Emergencies happen quickly and unannounced. It could be a foreclosure of your primary residence to pay off insurmountable debt, loss of work for an indefinite period of time, and so forth.

    Investing in real estate today can help ensure you have somewhere to fall back to when an emergency befalls you and your family. And it helps ensure that the living conditions you end up with are still safe and practical.

  • More Options

    Modern real estate investing has evolved to incorporate more options for investors to choose from. REITs, for instance, have lowered the minimum capital, which was previously a barrier to entry for aspiring real estate investors, to invest in a wide range of properties, from retail commercial spaces to apartment buildings.

    It’s also easier to rent your property nowadays, with platforms like Airbnb connecting you to short-term tenants and weary travelers. Being a successful Airbnb host, however, takes time and skill. Use an Airbnb course to learn strategies and business models on how to effectively rent your place out.

Financial emergencies may not seem like the time to start investing. And that may be true for certain investment vehicles, like options and futures, but recessionary periods do open up an opportunity to snag properties at significantly lower prices. Know when and where to invest, what returns are reasonable to expect, and what the risks are before putting a down payment.

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