Roughly half of the nation's business economists are predicting that the US economy will slip into a recession by the end of next year, according to a recent article by the Associated Press.
Plus, three fourths envision a downturn beginning by the close of 2021. Anyone involved with investment real estate knows that the market is cyclical. Lots of factors can trigger the rise or fall in rents, appraisals, taxes, expenses and, of course, sale prices.
Fortunately, commercial real estate investors can take actions before a fall to preserve assets and prepare for ongoing financial success. Here are three top recommendations from Forbes.com.
1 - Reserves
Like the mantra location, location, location, it's wise to set aside cash to protect your investment in trying times: reserves, reserves, reserves!
2 - Analyze and Re-prioritize Debt
Basically, refinance sooner than later. More investors lost their properties during the Great Recession from an inability to refinance than due to delinquent mortgage payments.
3 - Know the Break Even Point on Every Property
Avoid negative cash flow at all costs. What rent roll do you need to maintain the property and any debt service? Protect your break even point!
Other hedges against recession risk are:
Diversification - Both in geography and asset type
Tenant Relations - Keep 'em happy and healthy
Ask for Help - Brokers and other investors may well have valuable perspectives. Don't be shy.
Finally, we all watch investors of all types try to defy the most basic law of investing--Buy Low / Sell High. Maybe it's time to Harvest Equity by trading out of assets with strong appreciation.