The real estate investment market is constantly changing. Sometimes, it's on an upswing, while other times, it's in a downturn. No matter which direction the market is moving, being successful as a real estate investor means knowing how to navigate these changes.
What should you do to protect your real estate portfolio and minimize losses when the market experiences a downturn? Should you sell properties and wait for things to improve? Here are a few insights into navigating market fluctuations for long-term passive real estate investing success!
Hang On to Rental Property Real Estate Investments
When the real estate market starts to decline or seems to change without warning, it can be tempting to sell buy-and-hold rental properties and wait for things to improve. However, this strategy can often lead to significant short-term income loss and derail long-term goals. To regain momentum and rebuild income, property investors almost have to start over if they've sold properties during a tough market.
Instead of selling, hang on to your buy-and-hold investments. With a long-term passive real estate investing strategy, you can weather the storm and come out ahead in the long run! We haven't yet seen the market stay down—even if it seems like a downturn lasts forever. So even though cash flow may suffer when the real estate market suffers, selling can be shortsighted and force a long recovery to get your portfolio back on track.
Stay Focused On Running a Business
Another key to navigating changes in the real estate market is to remember that you're running a real estate business. This means having a solid plan in place before market shifts occur.
Most businesses don't simply shut their doors and quit when times get tough. Instead, they adjust their operations, shift strategies, and do everything they can to keep the doors open to generate income to weather financial challenges.
When you're first starting as a property investor, make sure your real estate investing strategies include putting money away to build cash reserves or an emergency fund. This will help you cover unexpected costs or repairs should tenants struggle to pay rent.
Additionally, reduce your costs wherever possible and seek insights from real estate experts who have weathered market downturns before. By doing this, you'll be in a much better position to stay profitable during tough times!
Be Prepared for Vacancies and Late Rent
If you operate rental properties, be prepared for vacancies or late rent payments when the economy and markets struggle. Chances are if you're having financial challenges, your tenants are, too.
However, with cash reserves (mentioned above), you have money saved to offset income loss. However, in lieu of tenants being unable to pay rent (or leaving for cheaper rental homes), consider a temporary reduction in rent to help tenants stay and pay something (because something is better than nothing).
Diversify Your Real Estate Portfolio
Last but not least, one of the best ways to navigate changes in the real estate market is to diversify your portfolio—or make sure it's diversified before a market downturn. This means having a mix of different types of passive real estate investment properties in different markets.
It might seem like a bad investment strategy to consider buying new properties when navigating a tough market. Still, fluctuating markets can be a good time to buy new properties at lower costs. For investors who plan ahead in anticipation of tough times, taking advantage of low housing prices can pay off when the market returns to a healthier state.
When the market shifts downward—and if you have the resources to maintain your current portfolio—consider a fix-and-flip opportunity or look into new markets that might not be experiencing the same trends as your home market.
For example, if you're only invested in single-family rental homes in a specific city, and the market crashes there, you could lose everything. However, if you have a mix of properties—such as single-family homes, apartments, and house-flipping projects—you're more likely to weather the storm.
Additionally, consider long-distance real estate investing in new markets that might not be experiencing the same trends as your home market. By diversifying your portfolio, you'll minimize risk and be in much better shape when things turn around.
Stay Up-To-Date On Potential Investments With Privy!
Market fluctuations are an inevitable part of real estate investing. However, if you have a long-term passive strategy and stay focused on running your business, you can navigate these changes with minimal losses and continue building wealth!
Market fluctuations don't have to be bad for your real estate portfolio. Successful investors plan for changes and prepare their finances to stay on track toward their goals. They also look for opportunities to capitalize on low housing prices and build on their real estate investments (even if ideal returns take a while to materialize after the market comes back).
Stay up-to-date on available investment properties in your preferred markets, no matter the current market conditions! Privy makes that possible and helps real estate investors find the best deals on the right properties. Reach out soon to learn more about how it works!
Learn more real estate investment strategies with our free resource, “How to Invest In Real Estate: A Guide!”