Best hedge against a recession is income properties.
May 07,2020 | Posted By Flavia Brown in Real Estate
Actually, owning a rental property is a wise investment in most real estate markets, not just during a recession. But buying an income property just before or during a recession is even wiser and is the best hedge. Rentals are in great demand in much of California, partly because most residents can’t afford to buy a home, and there is still a huge shortage of houses. So rent demand will be greater than supply for many years. Rental rates will continue increasing, and rental properties will continue increasing in value. Rental properties include SFRs, condos, townhouses, duplexes, triplexes, fourplexes (quadruplexes), and larger multi-units. Fourplexes are great income producers and are one of the safest and most desirable investments, because if the owner temporarily loses a tenant, 75% of the income keeps flowing in. A duplex is also a good investment, but if the owner loses a tenant, 50% of the income is lost. However, many owners live in one unit.
The most lucrative investment is a fourplex where the owner lives in one of the units. It won’t appeal to everyone because some buyers don’t want to live in a fourplex. However, for those who are fine with living in their own income property, it can be an attractive way to live, and the three renters will contribute to the mortgage payments. Typically, the owner of a fourplex lives in the front unit, which is a 3/2 on two floors, and with a 2-car attached garage with direct access. Meanwhile, depending on the desirability of the location, the property value continues to increase, and could increase substantially. After working with income properties for 15 years, I know how to find the best deals.
Flavia Brown, Realtor
P. S. I wrote a few more timely and informative blog posts. Click on “Blog.”
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