When I look at the state of affairs in today’s economy, I am quickly reminded about the Great Recession in 2008 and subsequent years. It was an impactful time for me personally. I had just left my high paying corporate job to be in commercial real estate full time. I remember thinking, ut oh….what did I just do? You see, even though I had been in real estate almost all of my life, as a newbie in the commercial industry fulltime, I had to learn a thing or two. I went from commercial real estate agent to commercial real estate therapist. I listened to investors who lost everything including $80m in one day, to the boats, cars, houses, wife kids and even the dog moved out. More importantly, I listened, I observed and I learned what not to do. I asked questions from veterans in the industry, what is your strategy to get through the awful financial time? Here’s a culmination of what I learned.

1. Diversification is Key: One of the most significant lessons from 2008 is the importance of diversifying investment portfolios. Relying solely on one market or property type can expose investors to heightened risks during a downturn. Spreading investments across different assets and locations can act as a safety net during economic upheaval.
2. Avoid Overleveraging: The 2008 recession demonstrated the dangers of excessive borrowing and leverage. Maintaining a reasonable debt-to-equity ratio helps investors weather the storm during economic downturns, preventing foreclosure risks and financial strain.
3. Research Market Fundamentals: Understanding the local market dynamics is crucial for making informed investment decisions. Pay attention to factors such as job growth, population trends, and infrastructure development, as these elements can impact property demand and rental income stability.
4. Prepare for Volatile Markets: Recessions often lead to volatile markets. Being prepared for fluctuations in property values and rental rates enables investors to react swiftly and adjust strategies to minimize potential losses.
5. Cash Reserves are Lifelines: Maintaining sufficient cash reserves acts as a buffer during challenging times. Having readily available funds allows investors to cover operating costs, mortgage payments, and take advantage of new opportunities that may arise amidst the downturn.
6. Long-term Vision Trumps Short-term Gains: During periods of economic uncertainty, it’s crucial to adopt a long-term investment perspective. Avoid speculative investments driven solely by short-term gains and focus on properties with stable income potential and enduring value.
7. Adaptability and Flexibility: In times of recession, markets shift, and investor preferences change. The ability to adapt and be flexible with investment strategies is crucial to surviving and thriving in a changing economic landscape.
8. Analyze and Stress Test Investments: Before committing to a real estate investment, thoroughly analyze the property’s financials and stress test them against different economic scenarios. This process can help identify potential vulnerabilities and allow for appropriate risk mitigation measures.
9. Consider Contrarian Investing: Opportunities often emerge during economic downturns, and contrarian investing involves going against the prevailing market sentiment. Identifying undervalued properties with strong growth potential can lead to substantial returns when the market rebounds.
10. Learn from Past Mistakes: Lastly, one of the most valuable lessons from 2008 recession is to learn from past mistakes. Analyze what went wrong during the downturn, both on a macroeconomic level and in individual investment decisions. This retrospective evaluation can help investors refine their strategies and build resilience for the future.

While we know that this is not a repeat of 2008, this economic downturn will The upcoming recession may present challenges for real estate investors, but it also offers valuable opportunities for growth and learning. By reflecting on the lessons from the 2008 crisis and applying them to today’s market, investors can position themselves to make informed and prudent decisions. Remember, knowledge, adaptability, and careful planning are the cornerstones of recession-proof real estate investing.

These are lessons from 2008 that my clients learned and I learned through them. As always, we are here to answer your specific questions and help provide a guide when it feels like things are going sideways. Call us at 813-995-9595. We got your back.