How “Recession-Proof” is a Property Management Business?

Question

I'm wondering What segment of real estate business is recession proof? Would a property management business thrive in recession? If not, what would be ideal real estate business during recession?

Alex Craig · Answer

@Jay Hinrichs $200 a door....that would be nice.   I think recession proof is a strong word, but people always need a place to live. If your mgmt company has good doors to manage, then I would say you will fair much better then managing low class properties.  Property Mgmt income may go down as rents go softer, but certainly sustainable. While that doesn't sound that bad, typically staffing is based on current mgmt income.  The cost to operate a good property mgmt company is much more then most think; so lower income into your mgmt company may mean managing the same amount of properties with the same overhead cost, but less revenue.  You can't just lay people off or hire a bunch of dummies if you plan to run a mgmt company, so those 2 options are not an option.

Sam B. · Answer

I think this time around the PM business will be hit a lot harder than it was in 08. Back then it was equity-hungry homeowners and flippers, this time around it seems to be a lot more skewed towards landlording, OOS investing, etc. I think a lot of landlords are going to go out of business on the downside of this cycle. In addition of course to the obvious tenant problems that will become more commonplace.

Fabi Bani · Answer

Thank you guys, I think appraisal is the most recession proof field in the real estate after all. Last recession I was flooded with REO and Shortsales and was making more than what I'm making now(due to some extra form to fill out on each appraisal with extra compensation) However, appraisal is a job, and I left my corporate job many years ago not to have another job. That's why I'm trying to get in to something within real estate that generates more freedom for me, specially now that I'm getting up there in the age category.

Jay Hinrichs · Answer

especially those that are buying low value assets in a given market place. .LIKE a Morris invest house.. Not sure why any PM would take that debacle on for instance. it would be a loser.  when you have unstable tenant base in the low end.. and they don't pay the PM does not get paid then has to answer to the owner and do the evictions etc.. to me is more akin of Asset management like what banks have to pay in other words only way I would personally own a PM company that worked in that area was on a fee per month REGARDLESS of if there was income.. And I would want at least 200 a month per door..

Bjorn Ahlblad · Answer

People that got carried away buying properties that don’t cash flow adequately will have a hard time-especially SFR and duplexes. OOS will be that much more difficult. If you are supplementing properties with money from your w2 job and that goes away you will feel some serious pain. PM should do quite well. Anyone who is not serious about operating their business-be it agent, broker, wholesaler, LL etc typically falls first in an economic downturn. People who have capital or access to capital can thrive in a recession. Cash will be king!

Bob Okenwa · Answer

Nothing is recession proof. There are things that are more likely to survive and operate through a recession, but there are no guarantees. PM-ing is a solid business, but if the economy downturns and evictions and vacancies go up, then it'll be a little harder to fill units as a PM.

How “Recession-Proof” is a Property Management Business?

Most Popular Reply