Property Investors, Are You Prepared for Recession?

Property Investors, Are You Prepared for Recession?

Despite denials from Washington, a good majority of financial experts and economists say the country is headed for recession. The last recession was recent enough that many of us still have clear memories of its impact on our investments. If you are an investor yourself, are you prepared this time around?

Our main emphasis here at Actium Partners is providing hard money and bridge loans to property investors. We will continue to do that even if the country enters recession. Right now, the more important issue is getting ready for what might be coming.

1. Analyze Your Cash Flow

One of the most important things investors can do in preparation for recession is analyze cash flow. Cash becomes especially critical during periods of economic downturn because lending becomes more restrictive. Without the ability to borrow as much, investors need more cash on hand to stay afloat.

Hand-in-hand with analyzing cash flow is assessing expenditures. As a property investor, you are probably spending a certain portion of your monthly budget on maintenance and repairs. Are there any extra things you can cut back on? Can you curtail some of your maintenance activities for the time being?

2. Analyze Your Debt Load

In a recessionary scenario, debt becomes a heavy weight. You may not be able to pay off all your debt before things start to go south, but at least analyze your debt load as it currently stands. A proper analysis may lead you in the direction of paying off certain debts as quickly as possible.

The debts that are the most costly to maintain will likely be at the top of your list. Paying down the most expensive debts reduces your liability at a time when you’re trying to maintain positive cash flow.

3. Consider Your Potential Liquidity

Although investors hope to not have to go down the liquidity route, recessionary pressures may leave them with no choice. What does your potential liquidity look like? Do you have assets you could quickly dispose of in order to increase your cash? If not, keep liquidity in mind for any future investments you decide to make in the short term.

4. Be Cautious with Borrowing

If regular borrowing is a normal part of your spin strategy, it may be time to back off a little bit and exercise more caution. This is not to say that you should cease borrowing altogether. Rather, we are simply suggesting that you look at each opportunity very carefully.

Now is not the time to overextend yourself. It’s not a good time to take on debt on thin assumptions that you’ll be able to pay it off on time. Simply put, do not take things to the edge. Leave yourself some wiggle room just in case things get too tight.