The coronavirus has created an economic storm that is putting stress on many business sectors ranging from transportation to hospitality. But an economic slowdown may be a reason to buy private real estate since the investment speaks to a variety of investor needs, including diversification and income generation, not to mention potential tax benefits.
At some point down the road, the stock market could move into a sluggish cycle or actual downtown. Real estate has generally been considered a hedge against the stock market during such downturns. An economic slowdown is a good opportunity to build a strong real estate investment support system and to carefully think through your strategies. Market dislocations, when fear separates prices from their underlying value and cash flow generation, are the best time for a prepared private real estate investor to carve out a good deal.
Knowing that the financial crisis of 2008 is still on the minds of many investors, they might think that because the “great recession” was caused by a real estate bubble that all recessions lead to depressed real estate prices. Actually, during three of the last five recessions, real estate values have actually increased.
President Joe Biden’s $1.9 trillion stimulus plan is both big and comprehensive and taken together with the $900 billion stimulus program signed on December 27, 2020, the combined outlay is a significant amount. Most nonpartisan, research-based think tank experts are saying that the specific components of the Biden bill are all good measures to get things moving again.
As investors, we must remember that things are never as good or bad as they seem. The economy, the markets, and real estate itself is cyclical. It will get better. Things will return to normal, and we must make good investing decisions. That will prepare us for when that shift back to normal occurs.
Economic downturns present a valuable opportunity to revisit your allocations and your investment timeframe, particularly with regard to investing in private real estate. Patience is never a bad strategy. Pay close attention to economic data. Recessions can be frightening, but don’t let them crush your investment dreams.