How NSI Helps Investors Capitalize On A Recession With US Real Estate
To cite a cliché, while there are specific difficulties involved in catching a falling knife or investing in a stock or a property when its price falls – many believe that when the economy goes into a tailspin, they’re better off not adding monthly bills.
Generally, the belief is not to buy items you want but don’t need.
At Noble Sky International, we believe that while you wouldn’t rush out to buy a new expensive watch or a Tesla Model S Plaid Model Excellence 24K just because you can – we look further into the actual value of the assets.
Are you buying an investment or just shopping?
For some, their rationale may involve keeping a tight purse to fight inflation and the recession.
Some Malaysians would gladly park a multi-deposit of RM250,000 (max) per depositor per member bank, protected by the Deposit Insurance System (PIDM).
Whatever you decide to purchase, it is all fine if you are Investing With a Purpose.
Income-generating assets like rental real estate and Airbnb properties can offer reliable, recurring Cash Flow Income without an investor having to be actively involved in managing the investment.
Buy When There’s Blood In The Streets
Nathan Rothschild, a 19th-century British financier, was credited with the saying, “the time to buy is when there’s blood in the streets.”
Whether Rothschild uttered that memorable line or not, it reveals an essential truth about betting against market psychology.
That’s the philosophy for contrarian investing.
Contrarian investing is an investment strategy in which investors purposefully go against prevailing market trends.
When prices fall and markets tremble, a bold contrarian investor could reap high profits.
So the worse the market is, the better the opportunities to profit.
Such investors sell when others are buying and buy when most investors sell.
However you look at it, the recommendation to “buy when there’s blood in the streets” is a solid approach to creating substantial wealth.
Great Recession (2007 – 2009)
The economic downturn was the most severe Great Recession in the United States since the Great Depression of the 1930s.
Artificially high home prices, loose lending practices, and increased subprime mortgages were economically unsustainable, yet the housing bubble grew unabated.
In 2007, the US housing bubble burst, coupled with the global financial crisis, and the US housing market started to plummet.
According to US census data from the mid-2000, the average housing price rose rapidly and peaked by 2007 when the average US home price reached nearly $314,000.
Seven years earlier, the average price of a house was $207,000.
When the economy heads toward a recession, investors naturally start worrying about the effect on their investments.
Invest In Real Estate To Capitalize On A Recession
During a recession, real estate offers another potentially lucrative opportunity without a substantial financial investment.
A recession doesn’t necessarily mean a significant drop in property prices.
However, as the central bank tries to tame the spiking inflation, they aggressively raise its benchmark interest rates.
When borrowing is too high, people think twice about applying for mortgages to purchase a second or third home or investment property.
When the economy fell into a recession, the global real estate market started to tumble as many loans defaulted.
If you’ve been eyeing investment properties, the recession-driven pullback in prices might provide a good head start and an entry point into the US real estate market.
Many liquid investors can start building and acquiring a portfolio of discounted, high-quality properties.
You can find new services from the leading convenor of real estate investors like Noble Sky International that makes it easy for you to enter into the real estate game – no matter the size of your budget.
How Much Have Property Values Increased Since 2007?
According to StripeHomes, US House prices have risen by 54% since the market crash in 2007.
Property values are now 27% higher than their pre-recession peak.
US Real Estate Is Hyper Local
Potential homebuyers should focus on something other than national trends, as these prices vary between states and neighboring cities.
Looking at property prices based on national and state-level data can be a mistake.
The 50 states of the United States are divided into 3,007 counties.
While 80% of the United States population lives in urban areas, the cities are split into small, medium, and large metropolises, conurbations, and megalopolises.
Hence home price trends are local, and medians may be misleading.
Even on the same street, with identical single-family homes, the prices can differ by about 20% depending on the sale’s circumstances.
- Did the property belong to a motivated seller?
- Was it an auction property?
- Is it a dilapidated home?
- Is it in a good school district?
- What about crime in the area?
US real estate is hyper-local, and at NSI, we look at local numbers instead.
Diminishing purchasing power impacts investors who invest in expensive high-end properties.
Their buying categories aren’t the properties’ NSI strategies for our investors.
For some of our investors, stomaching the downturn can be brutal if they fear the values will drop.
We recommend instead looking at income strategies where the main focus will be on income-producing assets that generate recurrent passive earnings.
Key Takeaways: A better recession strategy is to invest in well-researched investment properties that give you good cash flow and strong balance sheets.
Investing In Airbnb Properties Helps Investors Capitalize On A Recession
When investing in growth assets like Airbnb Properties, our strategy is to be cautious about buying at too deep a discount.
We are looking more at the Monthly Cash Flow.
We are not acquiring luxury properties (above the median) or properties at the median.
The houses we buy are not only below market value but are also, in general, below the median housing prices.
Our competitors are local American homebuyers who need a home and are looking at properties below the average market.
Local buyers are priced out even when these properties are in the same category.
The No. 1 reason for 32% of mortgage application denials is an unfavorable debt-to-income ratio (DTI).
As an investor, consider buying with all Cash.
With NSI, our partners and investors don’t need to grapple with high borrowing costs and mortgages as we buy with Cash.
Investing in real estate using high-interest-rate debt may dilute your returns compared to buying all Cash.
Our partners choose to invest with other co-investors based on an Operating Structure used and ownership percentages and look forward to healthy ROIs.
The Bottom Line
In times of prosperity, anyone can make a killing on the market – there is no need for clever advertising, appealing homes, or even house tours.
Properties fly off almost immediately after they are listed.
Home purchases are made quickly and happily as people feel confident about the economy and future.
Many embrace values and lifestyles that encourage overconsumption.
Keeping one’s perspective during a crisis or recession is a key differentiating factor that separates newbies and seasoned investors.
Professional investors take advantage of this when the market is in a panic.
Many foreign property investors use Cash when buying US investment properties.
For investors interested in building wealth and securing their future through intelligent investments with a hands-off approach – Noble Sky International can help you start your real estate investment journey during a recession.
You can schedule a 15- minute consultation call with us to learn more.
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