Much of the talk these days is centered around the inevitable recession. Almost every day another article predicts that it will start soon. Bloomberg reported August 2019 that the likelihood of a U.S. recession in the next 12 months rose to 35% in a survey of economists. Recently, the U.S. Treasury yield curve inverted, which many point to as another strong indicator of an oncoming recession.
Yet, Bloomberg also noted experts still see decent economic growth buoyed by a strong U.S. labor market and robust consumer confidence. In addition, California home sales in July 2019 rose above a year earlier as lower mortgage rates helped spur demand, according to real estate data analytics firm CoreLogic. No one knows exactly when it will happen, but it is inevitable that there will be a market correction/recession at some point.
As a real estate investor, you can take steps to be prepared, so you’ll be in a position to capitalize on market shifts. Having access to capital is a key component to capitalizing on any opportunity.
Prepare to Capitalize, Reduce Risk
House flipping volume has grown on a year-over-year basis for 12 consecutive quarters, and although flipping houses can be a lucrative way to build wealth, it is not as easy as it seems on TV, and there are many pitfalls and risks.
In the current climate it’s prudent to spend extra time to be as certain as possible of your numbers before starting anything. It is always unwise, and particularly so in a mature market cycle, to assume that the market will continue to rise like it has. Instead, you should be sure to analyze the downside, and understand what could happen if prices flattened, or decreased, and how that could impact your project. Also, understand what additional costs would be incurred if it took longer to sell your property, or you have cost overruns on the renovations. A rising market may not be there to bail you out.
Ultimately, no matter what the economy is doing there will always be opportunities in real estate investing. Mild or severe, when the recession does arrive, prudent investors will have considered different scenarios, and made decisions to help best mitigate the potential market risks.
Recession or Boom, Cash is Still King…
Having good relationships with capital sources, such as equity partners, and private lenders, is important. They can provide your business with leverage and liquidity, which can not only increase your equity returns, but also enable you to capitalize on any opportunities created by the ever shifting market.
Pivotal Capital Group is a private, non-bank lender for residential real estate investors in the State of California. Using its own capital, and offering competitive pricing and leverage, Pivotal may be able to help with your next project.
Click here to research our loan types and see what may be right for you.