How do you prepare your portfolio for a recession? Multifamily Investing

I’m waiting to see what happens in Q4

I’m just not sure how the market is going to react in the next couple of months 

I need to hold onto all my capital because once the market crashes I’m sure I’ll get new deals 

I really want to invest but there are just no opportunities right now because of the economy

I could write an entire blog filled up with just quotes from people who are paralyzed with investment fear because of all the doom and gloom on the news. During times like this, I think it is always good to examine investment performance from a historical perspective to avoid guessing or worse letting the news dictate how you invest your capital. For Today’s guest post I’d like to talk about why in the face of a recession Multifamily is a wonderful asset to invest in, and why you shouldn’t forever hold your capital looking for the perfect deal. 

Avoid waiting for the perfect environment to invest:

Let’s tackle why you shouldn’t be afraid to invest before diving into the benefits of Multifamily specifically. 

Please keep in mind that:
1. I’m not a financial advisor and
2. Regardless of what you are investing in you should fully understand the investment before putting any of your money at risk.

That being said there is a difference between walking away from a bad opportunity and closing the door on all opportunities because you are afraid of impending economic issues. There is no secret that the economy is in a rough spot with rate hikes, inflation, and massive layoffs taking over news cycles. However, this does not mean you can avoid the situation by stopping all investments and hiding till everything blows over. There will NEVER be a perfect environment to invest in, no magic equation will make a deal you are doing risk-free. This goes for any investment, there might be great times to be in real estate (take the last few years for example), but even in years of great returns, nothing was a guarantee. Regardless of what you were looking at you needed a team of quality operators to find deals and execute their business plans.  

If you are not confident in the market right now I think there are two major things you should be doing: 

1. Join a mentorship/mastermind network. Embrace the power of mentorship! 

It is no secret that I’m a part of Apartment Educators, that’s why I guest post on their platform. These types of mentorship/mastermind networks, allow you to surround yourself with others who know how to operate and find good deals regardless of the market environment. This means if you know multifamily is a good long-term investment but don’t know where to start, take this time to learn. This is the best opportunity you have to learn in quite some time because the deal flow is slower across the board! Investing in your education sometimes ties up some of your capital and if you are drowning in deal flow that makes the decision harder. However, now with a slower market, there has never been a better time to learn. There is also the MASSIVE upside of getting access to a giant network of other qualified individuals helping you find deals. This solves not only your deal flow problems but also will up your experience so as the market recovers you will be able to go after more opportunities. I’d be happy to talk about my AE experience with you or find a group that is more local to you, the important takeaway is to leverage this time to learn. 

2. Don’t pause your progress as the market slows.

A huge problem with any type of investing is everyone wants to learn how something works when it is winning, and everyone runs when it doesn’t seem like free money. From stocks, crypto, or any “Get Rich Quick” trend, people love jumping on investment bandwagons because they feel validated by others hitting it big on the news. This trend causes people to hear panic about raising interest rates and suddenly they stop looking at real estate altogether. There are still plenty of opportunities to do extremely well from an ROI standpoint not to mention multifamily tends to outperform nearly every other investment during times of recession. Don’t unplug, you need to be going to networking events, sending out LOIs, and continuing to look for deal flow. What you will find is the overall amount of opportunities you have might slow down, but they are still out there. If it becomes harder for you to sustain the grind, see my first tip! Expand your team, and work on deals together. You are losing money if you just let in your savings account, yes it might take more of your time to find a good deal but don’t let that scare you into losing money until the market recovers. Take the time to learn how to be efficient now in times of scarcity so in times of abundance you can leverage those same systems to set yourself up for extreme success. 

Why I’m Investing In Multifamily Right Now:

1. Recession Resilience 

With all the things going on in the news, why am I still investing in Multifamily right now? I think the best way to start this section is by examining a great quote from the CBRE study of the 07/08 crash. 

“Compared to office, industrial, and retail, multifamily experienced the lowest level of rent decline and the shortest period until rents reached their prior peaks”

Does this mean that no matter what happens in the coming months Multifamily will be the best asset class you can invest in? No, you still need to approach everything logically, however, if you are thinking we are going to see a crash similar to what we have seen previously why not invest in areas that have already proved to be the most recession resilient? 

2. ROI is still strong

I think the difficulty of talking about how well something does during times of economic turmoil overshadow the fact that there are still great deals to be found in the world of Multifamily. Please do not think of multifamily as the best option in a world of awful options, because that is not the case. Multifamily investing still remains a strong option, because the returns for investors were great in the first place. Multifamily is a great asset class in times of downturn or upswing, the biggest difference is that it might take longer to find quality deals as capital becomes tighter. Don’t let frustration over time to find a deal, or having to send out a few more LOIs make you forget how great the ROI is around multifamily investments. 

I hope this post calms some of your economic fears and encourages you to go out and tackle that multifamily deal you have been watching. Want to go after a deal together or learn ways you can invest alongside some of my opportunities?

You can always book a time to talk to me directly by clicking here. Happy to chat all things multifamily and show you how to start investing in deals. 

-Kenneth Sumners