Recession. The mere mention of the word sends shivers down investors’ spines.
The 2008 financial crisis still haunts the memories of many investors and has left a lasting impact on the world economy. Yet the housing crash of 2008 and ensuing Great Recession were an outlier — throughout most recessions, real estate has proven one of the most reliable investment options.
While real estate markets are not immune to economic downturns, some segments of the market resist recessions better than others. Research these real estate investments to help protect your portfolio before the next economic downturn.
1. Multi-Family Properties
Multi-family properties, such as apartments, duplexes, and triplexes, are one of the most popular recession-resistant real estate investments. People still need a place to live, even during economic downturns, so multi-family properties are often seen as a safe investment.
Rent from multi-family properties provide a steady source of income, even during recessions, as demand for affordable housing remains constant. Additionally, multi-family properties typically have lower vacancy rates compared to single-family homes, providing a more secure source of rental income.
During an economic downturn, some homeowners struggle to make ends meet and end up losing their home to foreclosure. Would-be homebuyers sometimes delay buying a home until their jobs look more secure. Both drive up demand for rental properties, keeping rents steady for investors.
2. Mobile Home Parks
Mobile home parks provide affordable housing for people who may be struggling during a recession. This can result in a steady stream of rental income for investors. Mobile home parks are also typically low-maintenance, as the tenants are responsible for maintaining their homes and the surrounding grounds. This can make mobile home park investments a passive source of income for investors.
3. Student Housing
When the job market looks grim, many people seek refuge in education.
College enrollment tends to rise during a recession as people look to improve their job prospects. Investing in student housing can provide a stable source of income as demand for student housing increases during economic downturns.
4. Storage Units
Storage units also make a great option for investors looking for stability during a recession. During an economic downturn, people may be forced to downsize or move to more affordable housing options. Others may choose to store their belongings in a self-storage facility instead of buying a larger home. That leads to an increase in demand for storage units, providing a steady source of income for the investor.
Self-storage facilities are also relatively low-maintenance, as the tenants are responsible for keeping their units clean and in good condition. This can make storage unit investments a passive source of income for investors.
5. Healthcare Properties
Healthcare properties, such as assisted living facilities, nursing homes, and hospitals, are often seen as recession-proof investments. With an aging population, the demand for healthcare facilities is expected to increase, providing a stable source of income for investors. Additionally, government funding for healthcare facilities tends to remain constant, even during a recession, making healthcare properties a secure investment option.
6. Commercial Real Estate
Commercial properties in sectors such as grocery stores, gas stations, and pharmacies are considered recession-resistant as these businesses are considered essential and continue to operate even during economic downturns. That provides a reliable source of rental income for investors.
Some commercial landlords operate under NNN leases. Also known as triple net properties, the tenant is responsible for paying all expenses related to the property, including taxes, insurance, and maintenance.
7. Industrial Properties
Industrial properties, such as warehouses and distribution centers, are also a safe investment during a recession. These properties are essential for the transportation and storage of goods, and demand for industrial space remains steady during economic downturns. Additionally, industrial properties are typically rented by established businesses, providing a more secure source of rental income.
8. Government-Leased Properties
Properties leased by the government, such as post offices and courthouses, are a safe investment during a recession as the government's need for space remains constant. This can provide a stable source of income for investors, as government leases tend to be long-term and provide a secure source of rental income. Additionally, government-leased properties are typically well-maintained and located in high-traffic areas, providing added value for investors.
9. Agricultural Properties
Agricultural properties, such as farmland and vineyards, provide a steady demand during recessions as people continue to need food and other essential products. Investing in agricultural properties can provide a steady stream of rental income and long-term appreciation. Consider investing in agricultural properties in areas with strong job growth and a growing population to take advantage of this recession-resistant investment.
Final Thoughts
This list is by no means exhaustive. Do your own research to find a recession-proof real estate niche that appeals to you, and learn all you can about it before investing.
Most of all, remember that all investments involve risk. Some investments perform better during recessions than others, but no investment is risk-free. Investors beware.
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