The Recession-Proof Nature of Property Management
March 14, 2017
to their clients is protecting their investment. While physical protection of one’s rental property is an important task, many companies also look at protection from an economic standpoint. In other words, the client must feel confident that their property management team is doing all they can to protect their investment from an economic downturn or recession as well. Unfortunately, some investors benefit from this while others may suffer from it.
Let’s face it. There is no magic formula for controlling the U.S. economy. However, the economic data that was published after the 2nd quarter last year (2016) revealed that there was an increased possibility of a recession looming on the horizon. Yet these types of statistics are not always reliable and, in some cases, can be very confusing. For property management companies that have been in business during the past three decades, it’s been an economic roller-coaster ride with bad and good markets alike.
Bad Markets vs. Good Markets
In a bad market, investors are looking for rental property opportunities, especially when the seller is unable to get the price they want for their homes. Others lose their homes in foreclosure actions. However, there is still some stability remaining in the housing market. Conversely, in a good market, home construction increases and rental property investors are finding new opportunities and adding them to their portfolios. Although there is more churning evident, the outcome is usually positive.
Cash Flow and ROI
During a recession, it’s all about generating and maintaining a cash flow. Your rental properties can generate monthly revenues and provide you with a good return on your investment, even during tough economic times. Typically, the only time the economy creates challenges for property management companies is when the population growth decreases or stagnates. On the other hand, the wise property investor realizes the following three truths:
- First, real estate is very much like the economy in that there are ups and downs.
- Second, we learned after the last recession that rental properties weathered the storm and came out of it none the worse for wear.
- Third, many property investors took advantage of existing opportunities in the rental property market in order to recession-proof their portfolios.
The bottom line is that rental property is still rental property, even during an economic downturn. The longer you hold onto your investment and let a property management company take care of it for you, the greater the chance of its value increasing. Even when the market dips, value appreciation will usually follow provided you hold on to a property and manage it right. And that is where partnering with a property management company can be the most beneficial. However, as a property owner, it is best to work with a company that is licensed, insured and bonded.