High inflation rates indicate an impending recession, as businesses react to higher costs by reducing production and increasing prices. And if the Federal Reserve takes action in the form of more rate hikes to curb rising inflation, there's a risk that the move could help trigger a recession.
With the recession fears looming, real estate continues to be a natural hedge against inflation, which can be an excellent place to park money in an uncertain economy. By moving money from the stock market into hard assets, investors can minimize the risk of an impending recession.
110 Southwest Railroad Street, Rose Hill, NC. A Walker REIG, LLC property of interest.
Invest in Real Estate
One of our favorite options for investing in real estate is joining others to invest in a bigger deal. This can be either commercial or residential. One of the best ways to start your real estate investing is through wholesaling real estate. The main benefit of this strategy is that you need very little initial capital. As a wholesaler, you find a property for sale, acquire a contract from the seller, identify a buyer, and assign the contract to him or her. The process usually takes a few days or weeks, and you can walk out of the deal with a few thousand dollars in your pocket. The only costs you have to cover are finding a property for sale and marketing the property to interested buyers.
Buy Rental Properties
Purchasing homes and renting them out is a great way to produce extra monthly cash flow.
This can be accomplished by purchasing a home with a combined monthly mortgage payment, home insurance payment, and property tax payment lower than the rent the property commands. There are several ways to do this - from buying in an area with high rents to putting a lot of money down, so the mortgage payment is low.
There are two downsides to owning a rental property directly. First, it typically requires a lot of upfront cash - from the downpayment to maintenance. It is critical to assess whether your return on investment will be worth it.
The second major downside of real estate is dealing with tenants. It is vital to screen renters before letting them move in. You’re also bound to hear sob stories at one point or another, so you’ll have to learn to be firm with renters. If you’re the type to give in to people quickly, you may be better off letting a property management service oversee your rental properties. Either way, there is ongoing work required.
Depending on who you talk to, rental properties can be very lucrative. And, if you do the upfront work of finding those hidden gems, you can let a property management service do the rest, and rental properties can be a form of semi-passive income.
308 N. Orange St. Wallace, NC 28466, a Walker REIG, LLC Rental property.
Flip Houses
Flipping homes can be a bit risky but also extremely rewarding. Since property values are steadily rising, it is an excellent time to flip homes before the recession hits. Flipping a house is the sum of purchasing homes under market value, fixing them up, and then selling them for a profit. To be a successful flipper, you need to hunt down those bargain homes – the less work you have to do, the better. The ideal flip home would be one that only needs minor cosmetic repairs. You could make the home look more aesthetically appealing and sell for profit.
When you decide to flip homes, you must prepare yourself for the possibility that the home may not sell fast – or for much of a profit. You take a big chance when flipping homes, so you must pay special attention to the home's location, needs, and price. However, if you have the knack for flipping houses, you could find this one of the best investments you’ve ever made.
320 N. Orange St. Wallace, NC 28466. A Walker REIG, LLC rental property.
Rent Out a Portion of your Existing Home
If you aren’t sold on the thought of purchasing a home only to recoup your money little by little, you could first test the waters by renting a portion of your house (also known as house hacking). You have a couple of options to do this.
First, you could rent a spare room in your home, or you could rent the basement. If you’re yet to purchase your first home and like this idea, you could even buy a duplex, live in one apartment, and rent the next.
The advantage of renting a portion of your house is that you get to watch your tenant closely. Renting a portion of your house also gives you the ability to get a feel for what it’s like to be a landlord without making such a substantial monetary investment.
Secure Your Wealth
With inflation running at multi-decade highs and markets decidedly risk-off against rising interest rates, the 2023 recession is top of mind. Now is the time to risk-off, moving from high-risk to low-risk investments such as owning real estate. As growth begins to slow alongside persistent inflation, many economists fear a prolonged economic downturn and stagflation in 2023. it's crucial for investors to understand the shifting trends of the economy and its effects on their investment portfolios.