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Buying A House During A Recession: How To Make It Work (Part 1)

According to a report by Oberlo, the United States still has a 50% probability of undergoing an economic recession this 2021. That probability will even increase if the government fails to pass another stimulus bill.

While a recession sounds scary, it does present a lot of opportunities for real estate investors because people would be selling their homes to relocate to cities with more job opportunities. And when people start selling homes, the housing supply increases and prices drop.

But that won’t be easy. There are still several factors you need to consider in order to make your investment pay off in these trying times. Keep on scrolling to read the various recession house buying strategies you should use.

1. Do your homework

A downmarket is advantageous to buyers because house prices are low. But that doesn’t mean you should go buying properties without studying the market and a plan. You’re not sure when the down market will last.

This point is very important especially for short-term investors such as house flippers. Because if you’re going to resell a house, and the downmarket would last long, your investment could sit for a long time as well. And that money could’ve been spent on other investments.

2. Organize and prepare

Make sure that you have everything you need: money, a real estate agent, and a mortgage pre-approval. Remember, you’re not the only house hunter out there. They will be much more prepared than you are.

You might miss the opportunity of buying the perfect investment property because the seller sold their home to someone who guaranteed a smoother transaction.

3. Look for motivated sellers

Motivated sellers are often in a hurry of selling their homes. You can use their urgency as an opportunity to bargain or negotiate. Some buyers ask sellers to pitch in fixtures they want such as lawnmowers or furniture.

Others even ask the seller to cover the closing costs or reduce the selling price. To know if the seller is motivated, take a look at the listing details or the property itself. A vacant home is a sign that the seller is paying two mortgages and could be in a financial bind.

Another sign is the listing has been up for a long time and has undergone numerous price reductions.

4. Check the location of the property

In addition to doing a market study before buying a property, you must take a look around the community if there are opportunities that would drive people to move in. Employment and the rate of people moving out are good factors.

There is no point in buying a cheap home for investment if businesses, factories, and other essential amenities are permanently closing down. You should also consider buying a property during a recession that’s close to markets and other commercial areas that will recover.

Renters and buyers prefer to live in a home where they can save gas or expenses from their daily commute.

5. Buy a home, not an investment

One of the most important traits of a real estate investor is the ability to think like an ordinary home buyer. It’s easy to buy a cheap home but it’s hard to sell it at a higher price. This is because some investors don’t consider if the home they’re selling is desirable to live in.

This idea is even more important to be stressed out during a recession because if you do buy a home in a downmarket for short-term investment and leave it empty, you’re also taking out its appeal as well as the neighboring houses.

When the neighboring real estate value drops even further, so should your property. Successful investors suggest living in the property itself for at least 3 to 5 years or have it rented out if the recession isn’t over yet.

A recession presents a lot of opportunities for you to buy an affordable home and sell it with a huge profit margin. But a recession is just a trend. You can't make sure if your investment decision really would pay off, especially if you have no plan or haven’t made a market study. There will be a part 2 of this article so please stay tuned.