Most analysts agree that we will see a recession in the next 12 months .
Will it be on the par of “ The Great Recession ” that followed in the wake of the last housing crash and subsequent global financial meltdown ? Probably not , but real estate investors must accept we are overdue for an economic downturn . That downturn could be magnified by legislation and policy decisions made by politicians afraid to say “ No ” to an electorate comprised of many voters who were children during the last recession and , as a result , have an unrealistic fear of the concept of an economic cycle .
Think about it :
During the last recession , the Millennial generation came of age and was , largely as a result of the downturn , stalled out for years as they accumulated studentloan debt and struggled to launch into their
Image by Gerd Altmann from Pixabay
own homes and lives . They have a skewed perception of economic cycles because the last one was so horrible for them and a “ unique ” perspective on how things might be better managed in order to prevent the catastrophe of a downswing ever happening again .
Younger adults do not even have the perspective that Millennials enjoy . They have no memory of adult life during a downswing and , as a result , cherish an unnatural fear of it .
These factors , along with the uncertainty that comes with every presidential election year and a number of classic market indicators that have been predicting recessions
for the past century , seem to be driving the point that a recession ( or a downturn ) is coming home .
What can stop this downswing ?
Probably nothing .
What could stall it and subsequently make the eventual downswing much , much worse ?
Politicians pandering to their public and burying their collective heads in the sand .
It ’ s not a question of if a recession is coming .
It ’ s a question of when and to what degree .
Whether you agree with me that a downturn is likely by the end of 2020 or you believe that the window is a wider 1224 months , the real question for smart real estate investors is :
“ What do I do to prepare ?”
We ’ ve all heard investors talking about what they wish they had done during the last downturn . I have heard so many people say things like , “ I should have bought everything !” or “ If only I had the capital then that I have now .”
Of course , in reality , just “ buying everything ” was only the starting point . Once the investors who did snap up properties in the wake of the housing crash acquired them , they had to maintain them . They had to generate returns . If they failed , they just lost the properties again in what , for many markets , was just the second wave of the crash .
Take Detroit , Michigan , as a prime example . You probably remember headlines about investors buying properties for literally one dollar . Then , a couple years later , you may recall that Detroit was still foundering and a lot of those properties were so neglected that the city had to demolish hundreds of them .
Did the investors who “ bought everything ” but couldn ’ t afford to maintain that investment ultimately score a big win ? Absolutely not .
In fact , many of them lost their shirts just like the original homeowners did .