No two real estate investments are the same. The thing is most real estate investments rely on the overall good performance of the economy and the looseness of the capital markets. Being dependent on these market conditions would leave investors at the whims of unpredictable force, which is impossible to control.
Now that you know this, do you think it is a good time to start investing in typical real estate opportunities?
Consider the following economic data:
Demographics
- The average social security check is at $1,200.
- 10,000 baby boomers enter retirement every day with little to no savings.
- A 2-bedroom apartment in the U.S. rents at around $1,231.
Employment
- Despite the claims that millions of job opportunities have been created during the Great Recession, the Q2 2016 report has shown that the U.S. economy is still 3.3 million breadwinner jobs short of the pre-recession levels.
- Non-farm payroll hours haven’t seen an increase since pre-recession levels.
Equities
- Despite the Fed’s effort of printing money and internet rate suppression, the S&P 500 has only yielded 5% annually over the last 15 years.
- The interest rate suppression by the Federal Reserve has inflated asset prices, which makes appreciation-based investing very unpredictable.
- The potential of contagion of the Chinese bear market has created a great uncertainty in U.S. markets.
What does it mean for investors?
This is not the time to focus on speculative investments, but it’s the perfect time to start investing in recession-resistant assets that are performing well during economic downturns.
Examples of recession-restraint assets:
- Self-storage facilities
- Mobile home parks
- Performing real estate notes
- Grocer-anchored shopping centers
These asset classes are doing well during economic downturns for a particular reason, but the overarching theme is that they are providing a service whose demand is either unaffected by the economy or has increased during recessions.
It is interesting to know that despite these asset classes providing a lucrative ROI for investors without the headaches in usual real estate investments, there are only a very few large institutions that are focusing on them, which can make the market substantially less competitive.