The Covid-19 pandemic has put a lot of financial strain on families around the world. It’s more important now than ever before to find the right investments to save money for a rainy day. There is a lot of noise about an economic collapse, which means investing might seem like a risky proposition. However, multifamily homes might be the safe bet you need right now.
The rental income from multifamily homes is a steady source that might get you through a recession. We will explain the top reasons why it’s a smart idea to buy multifamily homes if you’re looking for an investment that can potentially beat the 2020 recession.
Advantages of Buying a Recession-Proof Home
As with anything, there are both pros and cons in real estate investing; however, the advantages outweigh any disadvantages that come with it. The first advantage is that multifamily homes are cost-effective compared to buying the same number of homes separately. That’s because you can group maintenance costs, which means repairs will be cheaper. For example, you only need to hire one gardener, electrician, or plumber to look at the building. Also, when making inspections, you can visit all homes at once. There is no need to travel all over town to separate properties.
Multifamily homes are also a big earner for the amount of rented space. Typically, you can charge more than if one family was renting the entire building. Therefore, potential earnings increase significantly.
Finally, a multifamily home spreads the risk. Let’s say that one family moves out, and one apartment is empty for a month, not earning money. In the meantime, other families are still living there, which makes you money. Even if one tenant becomes problematic and doesn’t pay on time, the others likely will continue to pay.
During a recession, moving into an apartment costs less than moving into a home. Therefore, multifamily properties should have more success in finding tenants quickly.
How to Find an Investable Multifamily Home
You are not the only person looking for suitable investments during a recession. Real estate owners are holding on to their assets for the reasons outlined above. You’ll need to work harder than usual to find a property that is a good match for an investment portfolio.
You’ll need to practice more persistence and check listings regularly. The trick is to move quickly when you find something of interest. If you wait too long to make a decision, another buyer could move in ahead of you. Even in a recession, sellers may need to get rid of a hot property for various reasons. Be in the right place at the right time to take advantage.
Preparing Your Multifamily Home to Be Recession-Proof
Have you bought a multifamily home but don’t know how to make the most of your investment? Tilt the odds of success in your favor by implementing a few steps to recession-proof your home.
- Tenant retention: the goal is to keep your tenants in the property for as long as possible. Tenant turnover is costly because you may need to pay for cleaning and maintenance services as well as spend time looking for new tenants. Interview tenants to get a feel for how long they are likely to stay in the property.
- Capital reserve: it’s always a smart idea to save up money, but that’s an understatement in a recession. Your rental income might be significantly affected by a downturn. Tenants may lose their jobs and not be able to pay for months at a time. Therefore, you cannot rely on a steady rental income stream to support yourself.
- Cost control: multi-home renting is like owning a business – the aim is to keep costs down to increase the ROI. Therefore, don’t buy the most expensive furniture and flashy appliances. Instead, look for deals and bulk purchase discounts—they are a great way to limit costs and boost profits.
Multifamily homes are an excellent investment in a recession. All you need to do is find the right deal and make the purchase when it becomes available. There will always be a demand for multifamily homes, which makes it a low-risk investment.
Follow the list of preparation steps outlined above, and you can make the most of your multifamily investment. Take action by contacting Yankee Capital to help you reap the rewards, regardless of how bad the recession gets.