For property investors, there can be many upsides to downturns. The key is to make the best possible choice for your investment and carefully planning your next move. Should you renovate the property or try and sell it? Here’s what you should consider when choosing your plan of attack in a market recession.
When Should You Renovate?
If you purchased an investment property right when the market took a dip, hold on to it. You’ll be spending the time remodelling the project anyway, adding value to the property for when the market turns around and you can sell it. Don’t rush the decisions; take your time and see what additions could make a big difference: an extra or updated bathroom, a kitchen facelift, or a finished basement. All these can add a lot of appeal and make the property more desirable for potential buyers once the market rights itself.
There are other advantages related to the work! For the tasks you can’t do yourself, contractors will have more time to fit you in. Building supplies like concrete, lumber and plumbing are more likely to be available at lower prices, too. These lower prices and wider availability can make a project cost-effective or help you upgrade to higher quality materials while staying within or under budget. The final project could be better despite the cost savings!
An economic or housing market slow-down can turn the home improvements sector into a buyer’s market, making it an ideal time to accomplish the projects before prices rise again. But for some investors, strategic selling is the better choice.
When Should You Sell?
This is probably no surprise, but for those with money in the game, the truth sounds more painful than it is: an economic downturn means lower sales prices. The decreased demand in a softer market means you’ll command a lower price than what you wanted or imagined. While this can be hard to take, you can make up the potential losses by finding and buying a new property while you’re selling the current one. If you play your cards right, the gains and losses will even out!
But the reasons for selling can be personal as well as financial; say you’re moving to a new community, or your job took a hit and you can’t keep up the regular maintenance costs throughout the downturn. If you’ve looked over your situation and it makes sense to off-load the investment, be realistic about what you can get for the property and put it up at the closest possible projected price.
However, if a recession hits and you can weather the storm, the best thing to do is wait for the economy to improve. You’ll have the time to bring the investment up to a saleable condition while taking advantage of the lower material costs. Play it cool, and you can make a profit!