What is economic recession?
This term refers to an extreme weakening in the economy which affects economic activities across an entire region. A recession is characterized by slowed-down activities that are essential for economic growth. When there is a decline in employment, consumer spending and industrial production the economy is negatively affected.
Home-loan Interest Rates
Currently, the home-loan interest rate is 7% which is the lowest in over 40 years. But what does this mean for investors? Property buyers can expect to pay lower monthly bond repayments towards their overall loans. This is especially beneficial when setting up affordable rental fees that will cover all costs and also provide renters with a positive cashflow. The decreased interest rate also encourages people with good credit scores to buy property through borrowing money from banks or financial institutions. This is great for the economy and investors as well.
Property Value During Recessions
One of the most common effects of a recession, in this case also a pandemic, is the drop in property value and prices. It has also been said that while such times strain the masses, the wealthy increase their wealth. How do they do it in terms of property? As more and more people lose their job during recession, some decide to sell their properties at a time when property values are prone to be low. Experienced investors then seek out and seize such opportunities. To get great ROIs, they buy cheaper now and then sell for more later.
Effects on Tenants and Renters
Covid-19 has affected everyone, including tenants that lost their jobs or got salary cuts over the past few months. Particularly with residential rentals, the number of tenants in good standing has decreased due to rising percentages of financial lack. On the other hand, some tenants have taken initiative by discussing progressive, payment plans with their landlords for the coming months ahead. And the other reality is that there’s still more demand for accommodation than there is supply.
But what are your options as a landlord? The best thing you should do now is strategize, plan and be creative in your efforts to get tenants into your property or help those that are already putting bread and butter on your table by negotiating payment terms. Even though renting seems risky now, there are ways to get around investing in property fairly and successfully during covid. Consider negotiating with your tenants, getting compensated by the government fund, using different property strategies to diversify your portfolio etc.
Finally, property continues to be one of the most trusted investment options. There are rules, tools and strategies that are working for other property investors and they can work for you too. It starts with getting the right education to start heading in the right direction. Property investment has real benefits and is not only exclusive to those with a lot of money. Anyone can do it.
If you want to find out how you can use property to create streams of income, become financially free or elevate your investment register for our free property investment webinar.