Economy of the country is stable, unemployment is low, and interest rates are also at low levels. Yet many people are talking about an impending recession. Some like Bloomberg are saying that it could strike as early as the end of this year. It is a worrying sign for investors like you. However, there is one way to make your investment recession proof and that is to invest in multifamily properties. This is because rental income from such properties ensures that you continue to get good returns on your investment.
There are many reasons why investing in multifamily properties is a very good decision for you if there are any signs of recession. There is only one roof and exterior to maintain in such properties in contrast to separate apartments or single-family homes. This means you are better off as far as maintenance expenses of your investment properties is concerned. Also, all your tenants live under the same roof means you do not have to spend all your time visiting different locations to manage the affairs of your property.
One advantage of multifamily apartment building is that you continue to receive rental income after one or more of your tenants move out. Investors having single family homes lose on their rental income whenever the tenant moves out. In case of a recession, multifamily buildings d does not face vacancies. In fact, tenants from single family homes move into multifamily apartment buildings as their rents are low.
Tips to make your multifamily investment further recession proof
Even though multifamily properties are best bet for investors in case of a recession, they are also hit by recession. Thankfully, there are ways to minimize the impact of a recession if you are the owner of a multifamily building.
Keep a tab on your expenses
Positive cash flow determines if your property is profitable or not. To make sure it continues to remain so in the wake of a recession, it is important to work on cost control so that recession is not able to create a big impact on your investment. When tenants are also reeling under recession, it may not be possible for you to go for an increase in rent as the move may backfire. In this situation, it is your cost control that makes sure you can generate a positive cash flow from your property.
Have some reserve capital ready
When the economy is in bad shape and the recession hits, many of your tenants will not have the money to pay their rent for the time being. Instead of asking them to move out, you can make use of capital reserve to maintain the cash flow in your business. Secondly, you can use this capital to find a bargain deal on another multifamily building as prices drop during a recession.
Retention of tenants
One problem that investors face during a recession is that of retention of tenants. Many tenants decide to move out because of unemployment and other financial problems. You must be prepared for such an eventuality. Make sure you do not plan any major improvements on your rental property. Also, you cannot think of increasing the rent because of a tight economy. One way of tackling the problem of tenant retention is to apply robust tenant screening system. With its help, you can make sure that you allow only good quality tenants inside your property. You will be able to retain most of your tenants even when the economy of the country hits a roadblock.
If you are looking for an investment property now, the best option to make your investment recession proof is to find a multifamily apartment building.