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.

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? 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.