Member's Portal
Member's Portal

Should I wait for the recession?

By Eliav Kling
October 29, 2019

We are getting this question often in the past year – should I continue to buy real estate? Or should I wait for the recession?

It is not a secret that everyone is talking about the next recession. When will it come? How bad will it be? No one knows…

Are we heading towards one? Most probably. Statistically, we are closer to it than far.

BUT…

I am not pretending to be a prophet and I don’t think that even the greatest economists know when will it hit us. We all know that over 10 years past since the last recession and the stock markets are reaching new heights all the time. Based on history, we are due for another recession which will also cause a correction in the real estate markets.

What we do know is that the current situation is very different than what we had in the last cycle in 2008. Back then, the sub-prime crisis was the trigger for the recession which caused the real estate markets to crash dramatically (in most markets in the US).

The current situation is different – the banks (and other lenders) have learned from the last round and they are more conservatives with their lending policy. You can’t leverage today as you could have 12 years ago. According to my analysis (and again, I am no expert or pretend to be one), the next crisis will not be triggered by the real estate markets. It is more likely, that the next recession will be triggered by the commerce “war” between the US and China, or by another war.

My interpretation is that the real estate markets will not take the same hit as they took in 2008. We will still see a drop in property value. We will still see drop in rents and higher vacancy rates (for the initial part of the cycle), but I don’t think we will see too many properties that will lose 75% of their value.

So what is the answer? I would continue to buy real estate, but with caution. There are few steps any real estate investor can take in order to mitigate the risk of being caught by the next recession.

On those steps and more, I will write in the next blog.

Until then, invest wisely!!

Eliav Kling

Related Posts

Follow Us On

The relationship between interest rates and property value

The relationship between interest rates and property value

Let's break down how interest rates shake up the commercial real estate game. For us to do that, we will need to look at the way properties are being evaluated and the way lenders look at the risk when lending money to real estate projects.   In the commercial...

COVID-19 impact on the Real Estate markets

COVID-19 impact on the Real Estate markets

I will start by saying that what I write here is my personal opinion and should not be taken as advice or instructions. I can not see the future or predict what will happen, this is only my opinion and it should be taken as such! We all heard in the last few months...

We are proud to announce the sale of our Knox property

We are proud to announce the sale of our Knox property

The KERRA team is very proud to announce the sale of our Knox property. The Knox property was bought in April of 2018. It is a 32 units property that we have bought for a long term buy and hold. We didn’t plan on selling this property at this point in time, however,...

IRR – what is it and how to calculate it?

IRR – what is it and how to calculate it?

IRR is a term widely used in real estate. But what is it? IRR stands for Internal Rate of Return. It reflects the annualized Return On Investment (ROI) of an investment and it counts in all the profits generated by the investment from the time of acquisition until the...