With property prices skyrocketing nationwide over the last several years — especially in my hometown of New York City — it’s only logical for real estate professionals to begin shoring up protections for the inevitable downturn. Don’t call it pessimism; over the past several decades, the down times in real estate have always come in response to unprecedented rises, and it’s only natural that recent drops are indicative of a larger, nationwide slump in the housing market.
While it hasn’t swung the rest of the economy, the real estate business is in a decline cycle at the moment. While there’s no reason for real estate operators to panic, adequately addressing a down market is an essential part of business survival. Without a plan in place, you may find yourself out of work before the next boom happens.
Having learned much during previous downturns in 2001 and 2008, I can safely say my group is prepared for what’s about to come. If you aren’t so certain you’ve got the right plan in place, these and other proven strategies can prove incredibly valuable for ensuring that dips in the market won’t have your real estate business taking a dive.
Avoid doing anything rash …
First of all, the bad news of a recession is a tempting reason to act quickly, but acting rashly is nearly always a mistake. The phrase “patience is a virtue” should be engraved in every real estate manager’s desk as a constant reminder. In an industry that’s shown such incredible volatility, acting too fast often yields worse results than stepping back and letting things shake out before making your next move. When the downturn hits, you should be waiting for opportunities to present themselves rather than making purchases of shaky provenance just so you can say you did something. By keeping capital available, you’ll maintain the necessary readiness for the moment when worthy properties arrive at the market at a discounted rate.
… but stay moving.
While making impulsive moves is a big no-no, it’s imperative to stay in the game while the score is stacked against you. Don’t forget that downturns are empowering for buyers — they’re more able to score the properties they want when the market is leaning in their favor. While this may seem like it puts you at a disadvantage, by staying active and visible in this buyer’s market, you’ll attract more of these interested buyers than your competition does. Putting a small slice of your capital into extra marketing can keep your name visible in the midst of all the action, and you’ll keep business coming in to maintain the bottom line.
Fill low- to mid-tier vacancies.
For city-based agents like myself, rental properties are our bread and butter. They’re a reliable source of income at any time, but during slumps, their value is especially obvious. Collecting rent in these times is a steady paycheck, and every unit that’s full means another month we can keep on operating to the best of our abilities. This also means that whatever vacancies you have in a down market are a problem to be dealt with. Even if it means lowering rent somewhat to fill a long-empty apartment, having a regular tenant writing you checks every month is an absolutely necessary asset. With the value of the property going down, it’s imperative to hold onto existing tenants while bringing in new ones to occupy your empty apartments.
High-tier properties can be reworked.
Of course, as with any hard rule, there are exceptions. Vacancies in a high-end location aren’t the end of the world, as they can be turned around to provide even greater value down the road. If there’s anything luxury clients love, it’s the new and improved. If you decide to renovate, that untouched quality combines with the existing positives of the unit to provide a major increase in value. It’s not unheard of for a new renovation to add large amounts to monthly rent or sale prices, so this is an investment that’s often worth it even in lean times. Don’t forget that such units are catered to a crowd that can afford to stay picky, especially in a buyer’s market. Rushing to fill a property that could potentially be improved into a more valuable one is a mistake that’s easy to make but will cost in the long run.
Downturns are only natural, and while they deserve to be handled with the utmost seriousness when they occur, the temptation to overreact to them will, more often than not, make a bad situation worse. A rash decision can be hurtful even in times of plenty, so as we stare down the upcoming real estate recession it’s important to stay confident and stay steady. It’s the best way to ensure that we stay in business and come out on top.