Real Estate Investing Basics

3 Tips for Recession-Proofing Your Real Estate Investments

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There's a lot of talk about being due for another recession. While no one knows what's truly going to happen or when, I'm going to go over the ways I am recession-proofing my holdings and portfolio.

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How to Protect Your Investments From a Market Crash

1. Buy on cash flow.

This is why I love the Midwest—like markets in Ohio, Indiana, and Kentucky. Here I'm able to ensure the property is kicking off the necessary cash and underwriting on a worst case basis. If occupants see dips below a certain standard and rents start dropping, we'll still be fine. We'll be able to cover our mortgage and be able to make money.

2. Don’t bank on appreciation.

Most people are doing this these days in order to make the numbers work. Those who are banking on appreciation think that they'll sell the property in two or three years, and that's when they'll make the money. But until then, they will be in the red. From my perspective, that's a no-no. I wouldn't recommend it.

Related: Banking on Property Appreciation is Risky & Unwise

3. Go direct to owner.

This has been a crucial thing for us. By doing this, we’re avoiding overbidding and overpaying for property, because that’s when people are most inclined to do the other things—like banking on appreciation and assuming the rents are going to steadily grow. By going direct to owner, we’re controlling our own destiny and are still able to get properties at a discount, where the numbers actually make sense.

These are the ways I’m personally recession-proofing my portfolio. Hopefully you can take something away from my strategy!

What are you doing to protect your assets? 

Share in a comment below!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Madelaine Au from Eugene, OR
    Replied over 1 year ago
    Thank you for the awesome article! I’ve heard a lot of talk about another impending recession and I think these are great tips for minimizing risk. I appreciate you taking the time to share your knowledge on BP. Especially for newbie investors like me!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 1 year ago
    For sure! Glad you enjoyed the insight.
    West Wetzel from Denver, CO
    Replied over 1 year ago
    Mr. White, I’m curious if a recession is imminent would you suggest using cash to pay down debt as in a mortgage recast or hold onto the that cash in order to cover rent decreases and capital expenses? Thank you
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 1 year ago
    Both at the same time if possible.
    Stephen Tanquary from Fullerton, CA
    Replied over 1 year ago
    Hey Mr. White, Newbie here! Thanks for the article! I’m a little confused by the 3rd point, going direct to owner. Do you mean when purchasing your properties you don’t go through any 3rd party, like an agent? If so, can you help me understand how that helps prevent you from overpaying for your properties? Thanks again!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied over 1 year ago
    Correct, no agents involved. Dialogue directly with property owner. Helps avoid competition and bidding frenzy experienced with inventory listed on market with agent.
    Rasheed Ojuko Investor from Maryland
    Replied 4 months ago
    I have found that student rentals in a great location close to college campuses do really well during recessions. If you are able to put up with the wear and tear on your property as well as yearly turnovers, you'll do really well over time. Asides from being a great addition to your investment portfolio, student rentals provide strong cash flow (even during a recession).