Tips For Recession-Proofing Your Investment Portfolio

If the forecasts are accurate, there is a good chance we are heading into a new recession, if not already there.

That makes a thorough investment portfolio checkup a smart move. Some may want to restructure some of their holdings. Others just need to find more ways to recession-proof their current assets to get the most out of them in the years ahead.

Multifamily Real Estate Investing

We are all aware of the advantages of tangible assets like real estate in bear markets. In this post, we recently specifically covered why multifamily apartment buildings are so much more resilient in a recession. If they aren’t in your portfolio yet, it is time to take a look. If you have already been investing in multifamily, it may be time to increase asset allocation to this sector.

Here are just some of the ways you can get even better recession-proofing in your multifamily investment portfolio.

Diversification

By taking advantage of multifamily real estate syndication opportunities, investors can diversify across more assets. It may also be time to geographically diversify into new markets to have assets in all phases of the market cycle.

Financing

If you’ve used financial leverage, today’s low-interest rates provide a smart time to restructure debt for longer terms to provide more stability. Non-recourse financing is also highly desirable. Those averse to debt can look for equity partnership opportunities.

Know Your Local Renter Pool

All real estate is local. That includes tenant profiles — credit, income, tenure, etc. The better you track your pool of potential renters, the better you can adjust qualifications and pricing as applicable to maximize occupancy and NOI.

Build Loyalty

Those who are thinking bigger and longer than just covering next quarter’s bills and dividends know how important tenant loyalty is. You don’t want renters jumping ship to the next special offer. You know lease renewals are typically far more profitable than new leases. With a diversified portfolio, brand loyalty can be very valuable too. Maybe you have a building in Seattle and Atlanta. Those leaving Seattle for more affordable housing or new jobs shouldn’t have to leave your brand. You can re-house them elsewhere, and already know your tenants.

Eliminate Waste & Improve Efficiency

The better the margins you can operate on, the more cushion you will enjoy in the worst case scenario, and more net cash flow to be enjoyed in the best scenarios.

There are two fronts to this. The first is eliminating waste, eliminating waste on unit turnarounds, utilities, and labor in property management. Better systems and technology can go a long way here.

There is a lot of new technology to help improve efficiency in property management and investor management too. The leaner and faster you operate, the more recession-proof your investments.