It’s no secret that the real estate market is cyclical. What goes up must come down, and vice versa. In a recession, the market for commercial and residential property takes a nosedive. This can be a tough time for investors, who may see their portfolios shrink along with the value of their properties. However, there are opportunities to be had during a recession, especially for those who are willing to take a chance on real estate syndications.
What to do when Investing in Syndications During Slowdown
Have a clear investment Strategy – What types of investments are you looking for? What are your goals? What is your risk tolerance? Answering these questions will help you narrow down your options and make it easier to find the right syndication during a recession.
Market/consumer evaluation – What types of properties are in demand? What are people looking for? What can you offer that other investors cannot? By understanding the needs of the market, you’ll be able to find properties that meet those needs.
Properties that generate Cash Flow – In a recession, it is important to invest in properties that generate cash flow to help you weather the storm and keep your portfolio afloat. Look for properties that have a strong rental market or are in high-demand areas. These properties will be more likely to generate positive cash flow, even during a recession.
Illiquid Investment – Investing in real estate syndications can be illiquid. This means that it can take time to sell your investment, and you may not get your money back for some time. However, if you are patient and ride out the recession, you will eventually see a return on your investment.
Tenant Amenities – In a recession, it is important to invest in properties with amenities to help you attract and retain tenants. Look for properties with features like on-site parking, laundry facilities, and fitness centers. These amenities will help you keep your tenants happy, and your property leased up.
Value-add – Value-add investments are a great way to make money. These types of investments involve buying a property and then adding value to it through renovations or other means. By adding value to the property, you will be able to sell it for more than you paid, even in a down market.
Multi-family – Multi-family assets are more resistant to economic downturns than other types of investments because individuals are always in need of housing, no matter what the economy is doing. Look for properties that are in high-demand areas or have a strong rental market.
Self-Storage – self-storage proves to be a recession-resistant asset type as various life-changing occurrences happen, such as job loss, downsizing, and death. Properties that are in high-demand areas or have a strong rental market will be more likely to generate higher yields and more stable cash flows and offer investors a more diversified portfolio.
Mobile Home Parks – The affordability of mobile home parks create an alternative form of housing immune to economic downturns yielding a strong stance through volatile market cycles.
Diversification Your Portfolio
One of the best ways to protect your portfolio during a recession is to diversify your investments. This means investing in different types of assets, in different industries, and different geographic areas. By diversifying your portfolio, you will be able to weather any economic downturn and come out ahead in the long run.
Even during a recession, investing in real estate syndications can be an excellent method to generate income. By understanding the needs of the market and investing in properties that are in demand, you will be able to build out the right strategy for your investors to build confidence in.
For additional tips on how to invest during a recession, click here.
Investment Management Software
As a syndicator, your day-to-day flow of meetings, account management, and payment distributions can take an overwhelming toll if you lack the proper tools to manage important documents cohesively. By investing in a solid investment management platform, you’ll have the tools you need to communicate project updates with investors and oversee deal performance, payments, and legal documents in an investor portal.
InvestNext offers you one common area to manage the entire lifecycle of your real estate syndication. From capital-raising to waterfall calculations and distribution payouts. InvestNext gives you a high-quality experience while simultaneously giving your investors an institution-grade experience.
Learn more about how InvestNext can meet your syndication needs by clicking the link below: https://investnext.com/demo.