Why a “Down Market” is Often the Best Time to Buy Real Estate
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For investors, a market downturn is usually a scary time. This is a period in which the economy slows down and people spend less money, which means investments will likely produce underwhelming returns. It’s even possible to encounter some losses.
But smart investors will know that there are certain investments that can help you emerge even stronger even during times of economic uncertainty. During down markets, real estate is often one of the best assets to invest in. [1]
According to 58% of economic experts, there will be a recession later this year. This is why a lot of investors are now planning ahead and looking into new investment strategies. As the market drops, stocks will likely take a hit, and so real estate is quickly becoming the most promising option.
What is a Down Market in Real Estate?
A market downturn refers to a period of time when the overall value of a market or a specific asset class, such as stocks or bonds, experiences a sustained and significant decline. In a market downturn, it is not uncommon to see both unemployment and earnings fall as companies struggle to maintain profitability and reduce their workforce.
During a market downturn, the prices of securities or other assets in the market are falling, and investors may experience losses on their investments.
Market downturns can be caused by a variety of factors, such as changes in economic conditions, geopolitical events, or company-specific issues. They can be brief and relatively mild, or they can be more severe and prolonged, leading to a bear market. [1]
In the context of real estate, a “down market” refers to a market where property values are declining or stagnant. While a down market can be a difficult time for property owners, it can actually present a great opportunity for buyers. A market downturn can also result in a decrease in mortgage rates.
During a down market, sellers may have to reduce their prices in order to attract buyers, and it can take longer to sell a property. Conversely, buyers may have more negotiating power and be able to purchase an investment property at a lower price.
Investors often react to market downturns by selling their investments, which can exacerbate the decline in prices. However, market downturns are a normal part of the economic cycle. Investors should take it as an opportunity to buy quality assets at lower prices. [1]
Why a “Down Market” is Often the Best Time to Buy Real Estate
While investing in anything in the middle of a recession can be intimidating, investing in the real estate market can provide some significant benefits. For starters, housing is always in demand. The biggest strength of real estate is that people always need a place to live.
People can’t exactly cut out housing from their monthly budget, even when there is a recession. This means rental income will not decline the same way stock prices do. This is why real estate is often considered a safe haven investment during economic uncertainty. Make no mistake: it is not totally immune to economic downturn, but it is more resilient than other assets that heavily depend on the economy. [1]
The reliability of real estate can help offset your losses from other investments.
During a market downturn, the central bank may lower interest rates to stimulate the economy. Lower interest rates can make it more affordable for people to take out mortgages, which can increase demand for housing.
At the same time, the housing market may experience a decline in prices during a down market. This can make it more attractive for buyers who are looking for a bargain.
Investors can take advantage of real estate investing in order to generate income and cash flow during a recession. Not many assets can generate profit before you sell them. But because of rental income, real estate can give you a reliable source of cash during a down market. This even gives you some much needed liquidity. Smart investors look for new opportunities even during times of economic uncertainty. In fact, they know that recessions could create opportunities if you know where to look. [1]
Other reasons why investors should consider investing in the real estate market during a down market include: lower prices, less competition, more negotiating power, and potential for long-term appreciation.
When property values are down, prices for real estate tend to be lower. This can allow buyers to purchase properties at a discount, making it a more affordable time to invest.
There are also typically fewer buyers in a down market, which can potentially lead to less competition for available properties. With fewer buyers in the market, sellers may be more willing to negotiate on price or other terms.
Finally, by buying during a down market, buyers can potentially realize greater appreciation as the market recovers. Real estate values tend to appreciate over the long term.
Should You Sit in Cash or Invest in the Real Estate Market?
The decision to sit in cash or invest in real estate during a market downturn depends on your individual financial goals, risk tolerance, and investment strategy.
If you have a low-risk tolerance and are looking for a stable, long-term investment, then investing in real estate during a market downturn could be a good option. Real estate investments have the potential to generate cash flow through rental income, and can also appreciate in value over time.
In addition, during a market downturn, real estate prices may be lower, providing an opportunity to purchase properties at a discount.
For some investors who have a higher risk tolerance, the stock market remains a viable option. Just take note of its volatility. Historically, the stock market has provided higher returns over the long term, but real estate investments are known for being consistent and reliable.
Experts suggest choosing residential property over commercial real estate when the economy is down. Businesses are not heavily reliant on buildings the same way people are. So in an economic downturn, residential properties are safer. [1]
Investors should also look into different ways to invest in the real estate market, from real estate investment trusts (REITs) to real estate syndication deals.
Choosing between sole ownership and a partnership is another thing to consider. A joint venture limits transactions on both sides, however it could make it easier to buy a more expensive property for a higher return. [1]
With smart investing, market downturns could become opportunities to grow your wealth and achieve financial freedom. If your goal is to withstand a recession, real estate investments can be your solution. Just remember that no investment can give you guaranteed success. That said, real estate can be the most reliable asset class in the face of economic downturns.
Why Smart Real Estate Investors Use Dollar-Cost Averaging
Smart investors often use dollar-cost averaging (DCA) as an investment strategy because it allows them to invest in the market over time without trying to time the market. With DCA, investors invest a fixed amount of money into a particular investment at regular intervals, regardless of the current market price. Over the long term, this can lower your investment costs while boosting returns. [2]
The benefits of DCA are twofold. First, it reduces the risk of investing a large sum of money at once and potentially buying at a market peak. Instead, by investing smaller amounts over time, investors can potentially buy at various market levels, including dips, which may result in a lower average cost per share.
Secondly, DCA allows investors to avoid the stress and complexity of trying to time the market, which can be difficult, if not impossible. DCA takes a disciplined approach to investing and avoids the temptation to make emotional investment decisions.
In real estate, dollar-cost averaging can be done in different ways including through real estate mutual funds, exchange-traded funds (ETFs), crowdfunding platforms, and even rental properties.
For investors who want to own rental properties, they can use dollar-cost averaging to build their real estate portfolio over time. By investing a fixed amount of money at regular intervals, you can gradually acquire properties and build a stream of rental income.
By purchasing assets and securities over time at regular intervals, investors can decrease the risk of paying too much before market prices drop. Dollar-cost averaging even allows your money to work on a consistent basis, which is important for long-term investment growth. [2]
Dollar-cost averaging is a smart investment strategy because it allows investors to invest consistently over time, while reducing market timing risk and potentially lowering the average cost per share of their investments.
Try Multifamily Real Estate Syndication
There are many ways to invest in real estate, but accredited investors have another option that is exclusive to them, and it is definitely worth considering if economic experts are anticipating a recession.
Multifamily syndication is a form of real estate syndication that focuses on multifamily properties such as apartment complexes and condominiums. Just like other real estate syndication deals, it involves pooling the resources of multiple investors in order to purchase a single property. [3]
Multifamily syndication is very popular among accredited investors because it allows them to participate in a large real estate investment that they normally couldn’t buy on their own. It is usually too expensive or too risky to tackle such a large project alone. But with a syndication deal, you can invest and still get all the benefits without having to buy an entire apartment building by yourself.
Multifamily syndication can be a good investment strategy during a market downturn for several reasons. For example, multifamily syndication provides investors with diversification. By pooling funds with other investors, individuals can gain exposure to multiple properties, reducing the risk of having all their investments tied up in a single asset.
Multifamily properties are also known for generating a steady cash flow even during economic downturns. Demand for rental units can remain strong even during tough economic times because people always need somewhere to live.
In real estate syndication, a syndicator or general partner puts the deal together and looks for investors who will act as limited partners and provide most of the capital needed to purchase the property. These deals are usually structured as a limited liability company (LLC) or a limited partnership (LP). [3]
The investors usually share in the profits and losses of the investment and, depending on the deal structure, a share of the capital appreciation upon resale.
Syndication deals are a passive source of income because it is the syndicator’s job to handle property management. Investors do not have to carry the responsibility of being a landlord—something that you would have to take on if you were purchasing a real estate property by yourself. This means the syndicator is in charge of rent collection, managing tenants, and dealing with emergencies.
With multifamily syndication, you can just enjoy the strong and reliable cash flow without any of the usual headaches associated with running this type of business. This makes multifamily syndication one of the most attractive investments for accredited investors especially during a down market.
Work with BAM Capital for Multifamily Syndication
There is usually a lot of uncertainty during an economic downturn, but investors can find some peace of mind by working with a reliable syndicator for their multifamily real estate syndication.
Work with BAM Capital so you can enjoy the Indianapolis-based syndicator’s award-winning approach to multifamily syndication that creates forced appreciation and mitigates investor risk.
This syndicator has a strong Midwest focus, prioritizing Class A, A-, and B++ properties with proven upside potential and in-place cash flow. BAM Capital will help you grow your wealth through multifamily syndication, guiding you every step of the way.
BAM Capital is a vertically integrated company that will negotiate the purchasing of high quality multifamily real estate. Being vertically integrated means they can also handle property management and even renovations. [4]
BAM Capital is known for its consistent track record. In fact, they now have over $700 million AUM and 5,000+ units. This is one of the best syndicators in the business.
No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.
For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, look no further than BAM Capital. Schedule a call with BAM Capital and invest today.
BAM Multifamily Growth & Income
Fund IV
The BAM Multifamily Growth & Income Fund IV, a private real estate fund, seeks to balance cash flow stability, capital preservation, and long-term capital appreciation while providing superior risk-adjusted returns to investors.
Benefits of Multifamily Investing:
- INFLATION HEDGE: ability to raise rents on short-term leases to mitigate rising costs
- TANGIBLE ASSETS WITH CASH FLOW STABILITY: a consistent income stream that is not impacted by the ups and downs of the stock market
- ACCELERATED TAX BENEFITS: performing a cost segregation analysis and accelerating the allowable depreciation can lead to major tax savings
- SUPPLY & DEMAND IMBALANCE: there is not enough housing supply in most US markets to keep up with the demand
- CAPITAL PRESERVATION & APPRECIATION: typically low-risk investments that should produce optimal risk-adjusted returns
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