Why Now is a Good Time to Invest in Real Estate 

Investing in real estate during a recession, like any investment, carries its risks. However, recent events, such as the pandemic, have demonstrated that even what we consider "safe" sources of income aren't guaranteed. Major corporations have initiated hiring freezes and massive layoffs, which is typical in recessionary times. In the stock market, the volatility of the past two years has left many investors uncertain about their portfolios. According to the CBOE Volatility Index (VIX), stock market fluctuations surged 70% in 2020 during the pandemic, illustrating the unpredictability of the market.

Additionally, inflation, which has reached levels not seen in decades, is forcing investors to reconsider their cash positions. However, as Warren Buffet famously said, “Be greedy when others are fearful and fearful when others are greedy.” This principle can be applied to real estate investing, particularly in times of economic uncertainty like today.

Real Estate: A Hedge Against Risk and Inflation

Real estate can act as a hedge against some of these risks. One significant advantage of real estate investing is its ability to provide a steady cash flow. For instance, real estate investors typically generate monthly rental income, which remains stable even when traditional income streams falter. In a recent survey by Gallup, 45% of Americans said they believe real estate is the best long-term investment, far surpassing stocks or gold.

Moreover, real estate is an excellent hedge against inflation. Inflation drives up the prices of goods, services, and rents, but if you've locked in long-term, fixed-rate debt, your mortgage payments will remain stable while your rental income increases. This means that, while inflation erodes the value of cash savings, real estate investors can enjoy rising income and appreciation. Between 2000 and 2020, U.S. home prices increased by an average of 4.6% annually, according to data from the Federal Housing Finance Agency.

Less Competition and Stabilizing Prices

Now is an optimal time to invest because real estate prices are beginning to stabilize. While we aren’t expecting a dramatic crash like the 2008 financial crisis, prices have cooled from their peak in 2022. This provides an opportunity for savvy investors to purchase properties without the intense bidding wars seen in previous years.

With less competition, you can find professionally vetted, cash-flowing properties that generate monthly income. Even during a recession, a well-managed rental property can produce stable cash flow, providing a buffer against economic downturns. According to a study by Real Capital Analytics, multifamily property investments delivered a total return of 9.14% from 2010 to 2020, demonstrating their resilience through economic cycles.

Recession-Proof Real Estate Classes

While some assets, like stocks, can be highly sensitive to economic swings, real estate, particularly commercial real estate, tends to be more resilient. During the Great Recession of 2008, certain asset classes, like multifamily properties and self-storage, outperformed the market.

Furthermore, real estate offers the potential for forced appreciation—increasing a property’s value by raising income and lowering expenses. This makes real estate a powerful tool for building wealth in both good times and bad.

Tax Benefits That Protect Your Cash Flow

Another key advantage of investing in real estate during a recession is the tax benefits it provides. Real estate investors can take advantage of deductions for property depreciation, mortgage interest, and maintenance expenses. This allows you to retain more cash, which is essential during uncertain economic times.

If there’s one takeaway from recent economic uncertainty, it’s that relying on a single source of income can be risky. Diversification is critical to long-term financial security. Real estate can act as a valuable component of a well-rounded investment portfolio, offering cash flow, tax advantages, and inflation protection.

Investing in real estate can help secure your financial future, providing peace of mind when other investments may fall short.