Being a real estate investor and a property owner in a time of crisis can be a double-edged sword. Navigating a real estate crisis is not an easy task, and dealing with real estate strategies during this period can be significantly more challenging.
Even though the real estate crisis is rare and highly unlikely, it’s never a bad idea to be prepared. Take a look at these 6 steps that can help you avoid losing money during a real estate crisis.
Never panic sell everything
It happened before that people dealing with real estate started panicking the moment the value of their property started to fall. As a result of their panic, they started selling everything they own.
The worst thing that you can do when a crisis hits is rush to sell everything you own in order to salvage as much value as you can before the prices hit rock bottom.
This is a bad strategy and a very short-sighted reaction of inexperienced real estate investors. By doing this you can lose a property that can still generate some positive cash flow. While there is still rent income, there is no need to sell the property. And yes, maybe the rent won’t be the same during the crisis, but it’ll still be better than nothing.
Make some changes and concessions to your tenants
Always keep in mind that when a crisis hits, both you as a landlord and your tenants are equally affected. Having this in mind, you must consider your tenant’s situation as well.
To avoid losing money, try renegotiating the lease with your tenant. If you don’t, you risk losing those tenants and potentially losing all the money.
To keep your tenants during the crisis, think about reducing the amount of money you get from them monthly. Yes, this is not ideal, but it’s still better than not getting any rent money at all.
Adapting to the new situation
In order to adapt to the new situation on the market, you’ll need to change how you rent. With this being said, you’ll need to convert your short term rentals into the long term.
Short term rentals such as Airbandbs are usually the ones most affected by any real estate crisis as they are the ones who experience significant income loss. The best solution for them is to follow the demands of the market and change the way they rent.
Work with professionals
Navigating through a crisis is never easy, especially if you’re not experienced enough or you’ve never worked under pressure. During these difficult times, it’s very easy to lose both money and great properties.
So, consulting with property lawyers and flexible real estate agents can help you deal with any crisis without losing money or having to sell properties.
Apart from that, during times of crisis, many uncomfortable situations can also arise – from lawsuits to disputes. For example, when renegotiating the lease with your tenants make sure you consult with your litigation lawyer.
Many legal disputes can arise and a relationship between a landlord and a tenant can become strained. For any legal issues related to real estate, the best idea would be to hire an experienced litigation lawyer.
Cut your expenses
The best approach to dealing with any crisis is to be prepared for the worse. Be prepared for the crisis to last longer than what most experts predict.
By thinking this way, you can plan ahead on cutting your expenses. This is done by reducing utility bills and negotiating mortgage payments and other similar conservative approaches.
Reducing or cutting your expenses means avoiding losing huge amounts of money when the crisis hits.
Savings
Just like having a solid plan on cutting expenses in case a crisis happens, another good idea is having money in a savings account.
This emergency money can mean a lot in the worst-case scenario, and a worst-case scenario can happen any time. Also, keep in mind that a crisis can last for months and even a year, so the last thing you would need in that case is to be indebted without any emergency money on the side. Start your savings account now, you never know when the crisis may strike.
Dealing with real estate during a crisis is not easy and it always comes with some challenges -properties lose value, prices fluctuate, tenants’ rents become significantly lower, and so on. The good thing is that over time and once the crisis is over, those properties can once again increase in value. So, hang on tight and follow these tips and the crisis will pass!
