The Guide to Investing in Real Estate During a Financial Crisis

It’s never fun to navigate stormy times, but economic downturns are just as much a part of investing as sunny upturns. Smart real estate investment strategies will keep you steady despite rough waters.

The rollercoaster start to 2020 might have made you anxious about your investments, but the experts at BiggerPockets know exactly how to weather an economic downturn. Here’s what you need to know about today’s economy, including how to manage your existing investments and where to put your money next.

Don’t repeat the mistakes of the past

When I asked J. Scott, the author of Recession-Proof Real Estate Investing, his advice for investors who haven’t weathered economic downturns, he had—unsurprisingly—a lot to say.

“I remember a couple occasions in college stumbling back to my apartment after a few too many drinks, the room spinning, lying on the edge of my bed and thinking to myself, ‘I will never do this again,’” he says. “And for a few days, maybe even a few weeks, that memory was enough to keep me from doing it again.”

But the memory of the misery didn’t last. “The pain, sickness, and nausea were no longer fresh in my mind, and I was free to be the same stupid kid, making the same exact mistake,” he says.

What does this have to do with real estate investing? A lot, actually.

In the early aughts, before the effects of the 2008 recession started to fade, Scott spoke with a number of shell-shocked investors. All of them faced financial and investing struggles, “But we made it through, each of us with a newfound perspective on what a massive economic shift could do to our industry and with a healthy fear of it happening again,” he says. “At the time, it was hard to imagine the good times ever returning.”

Things did get better. We’re here, a decade later—and like those hazy college nights, the memory of 2008 has faded away. “I still have the memories of feeling scared, confused, and overwhelmed, and feeling things would never return to normal,” Scott says. “But I just can’t put myself back in that place to really feel it. It’s more like a dream than a memory.”

He’s not the only investor that feels that way. Many have been operating like 2008 never happened, and have lost their perspective on how bad things can be. In this current crisis, Scott says he sees a lot of investors who are suddenly snapped back to reality, once again catching a glimpse of the potential bad times that real estate can bring.

Except we’re not college students anymore. As real estate investors, we have the gift of hindsight—and we can’t hesitate to use it.

“As investors, we must always remember that things are never as good or as bad as they seem,” Scott says. During the bad times, “We have to remind ourselves that the economy, the markets, and real estate itself is cyclical. It will get better. Things will return to normal, and we must make good investing decisions that will prepare us for when that shift back to ‘normal’ occurs.”

Hindsight is important for the good times, too. “When it seems like the party isn’t going to stop, when it seems like real estate prices will never stop going up, we need to remind ourselves that every bull market has an expiration date,” Scott says. “As difficult as it can be to remember what it felt like last time, we must try to put ourselves back in those shoes so that we can adequately prepare ourselves for an unavoidable period of angst and uncertainty.”

Ready to prepare yourself for a successful financial future? Here’s how.

Protecting your investments during an economic downturn

Nobody ever feels adequately prepared when markets become unstable. The news flow comes fast and furious, and some people make a living peddling fear out of self-interest, compounding investor anxiety. Every investor should practice patience in times like this.

Economic downturns present a valuable opportunity to revisit your allocations and your investment timeframe. Remember: Time has always rewarded consistency with strong returns in stocks, bonds, and real estate.

Patience prevails

Being a long-term investor means staying invested even when the market is in turmoil. In an average year, the S&P 500 has a decline of at least 13% at some point on the calendar. Yes, this decline is certainly steeper than most, but if you make regular contributions to a 401k or an IRA funding program, your next monthly contributions are buying more shares for the same amount of dollars.

Here’s an example. Let’s say you own 100 shares of stock. They were worth $50 per share at the beginning of the year, making your investment worth $5,000. If the stock falls by 50%, your investment is now only worth $2,500—but you can now buy another 100 shares for only $2,500 more. When the stock eventually rebounds and returns to $50 per share, you’ll own $10,000 worth of stock, with a cost basis of $37.50 per share (half at $50 per share and half at $25 per share), and you’ll have earned $2,500 on the position.

This process of investing the same dollar amount in stocks or funds at specific times, regardless of what the market is doing, is called dollar-cost-averaging. This method is the most efficient way to invest in the stock market, assuming you plan to participate for 10 years or more. It takes emotion out of the process and allows time to be your ally. And opportunistic investors with long time horizons even come to appreciate finding the stock market on sale!

Worried about your 401k? If you’re not retiring soon, make sure to keep contributing at minimum whatever percentage your employer is matching—these contributions are on pre-tax dollars and it’s just too much benefit to pass up. You are literally getting a 100% return on any matched amount your company contributes—even if you have to wait for that contribution to vest. And if you are close to retirement age, your financial plan should already include at least 60% of your assets in risk-averse, fixed-income securities. Most bond funds have held up very well so far in 2020, with some even putting up strong gains as investors fled stocks and searched for safer pastures.

Economies and stock markets work in cycles, and every prior bad cycle in the history of time has worked out just fine, rewarding committed long-term investors. In fact, the most successful investors use market downturns to sharpen their education, expand their toolkits, and prepare for the next opportunity. And they never make rash decisions.

Let me repeat that for those in the back: They never make rash decisions.

Markets fall. Economies run in cycles. This is inevitable—but your long-term investments won’t suffer, as long as you remain committed to strategizing and improving your financial education.

Don’t fall into the trap of 2008 comparisons

Because it was the most recent recession, it’s natural to want to draw comparisons to the recession of 2008. But it’s an extremely poor comparison to make, and real estate investors could wind up in trouble if they react according to ill-informed expectations. All signs point to this coming recession being nothing like 2008—or the 2001 recession, for that matter.

In 2008, the housing market was flooded with subprime mortgages given to people that couldn’t even come close to affording a home. Lenders allowed zero-income verification loans with no cash down—so when the market crashed, they were forced into foreclosure. Additionally, people were flipping houses two or three times per month, and the rising prices validated their bad decisions. Builders were constructing new homes as fast as they could. All this formed a bubble focused squarely on real estate. As a result, real estate prices fell dramatically. Some markets saw valuations drop by more than 35%.

But in most recessions, real estate holds up just fine. In fact, sometimes prices don’t fall at all, or simply remain flat for a couple of years. No problem at all for the buy-and-hold real estate investor. In fact, this historical housing market strength contributed to the 2005 through 2008 bubble. Everyone thought, “Well, real estate always goes up, it never goes down. Let’s plow in.”

Wrong then. But not necessarily wrong now—because investors learned valuable lessons about excess from the 2008 recession. For example, housing starts (or new home constructions) were much lower in 2020 going into this downturn. Interest rates are also much lower, creating more demand.

Pay attention to interest rates

Most real estate investors know that mortgage interest rates tend to move as so-called “benchmark” government bonds rates, like the Fed’s discount rates, move higher or lower. When government bond yields are rising, mortgage rates typically rise as well, and vice-versa.

Mortgage rates, should they continue their historical pattern of tracking treasury rates, could hit new multi-decade lows in the months ahead—after all, 30-year Treasury bonds now yield less than 1.5%. That doesn’t mean that a 30-year fixed-rate mortgage will eventually drop to 2%, but it will likely fall further.

Typically, it takes three to four weeks before mortgage rates adjust to market interest rates, because major banks must adjust their underwriting process and market their updated rates to customers and mortgage lenders. In times of severe financial distress, like we’re seeing now, this lag time usually increases; there’s more uncertainty on the part of both lenders and buyers.

Real estate risk factors during a recession

It’s not so simple as lower mortgage rates bringing more buyers to the table and keeping property prices on their upward trajectory. Back in January, CoreLogic estimated that residential real estate values would rise more than 5% in 2020; that estimate is no longer anyone’s expectation. The strong recent run of property appreciation will at least take a breather; whether the picture will darken into declines in property values over the course of 2020 is uncertain.

Here are the biggest risk factors to property values in 2020:

1. Widespread layoffs and job losses from a protracted “social distancing” environment, leading to household incomes plummeting. Foreclosures and evictions would rise, lowering cash flow for rental investors and making lending a riskier proposition for banks. It could also increase the supply of vacant properties.
2. Real estate investors “hunkering down” with cash, pulling away from buying real estate. Stock losses create a “negative wealth effect” feedback loop. (What’s a wealth effect? It comes from behavioral psychology. We spend more and “feel richer” as our assets in things like real estate and stocks appreciate in value. The same is true in reverse—when stocks or real estate fall in value, we spend less and feel poorer, regardless of the actual impact to our monthly income and expenses.)
3. Residential property buyers can’t visit open houses so traffic comes to standstill, further increasing the supply of available homes.

We already see signs that large banks are more hesitant to lend capital. They have no choice—in addition to mortgage lending, these banks also lend to airlines, hotels, and cruise ship operators. These industries and companies may default on large loans without a massive government bailout.

Banks don’t want to take on extra risk. Why should they? Millions of consumers are being laid off or having their incomes drastically reduced. This could go on for 12 to 18 months, according to some medical experts—secondary and tertiary waves of the outbreak next fall and winter could happen because nobody has immunity to this new virus. Banks have to be ultra cautious.

There may be relief in (some) rentals

“Things aren’t all bad during a recession,” says Scott. Yes, renters have less money to spend on rent—and high-end rentals, often known as Class A rentals, might see drop in market rents as renters flee to cheaper units. Class B rentals may experience a similar effect.

But everyone needs a place to live.

“While renters will often move down in class, they generally aren’t going to go homeless,” Scott says. “Working class rentals often see increased demand and increased market rents due to all the renters moving from Class A and Class B rentals, as well as those transitioning out of homeownership during foreclosure.”

Another hot rental opportunity? College housing. “A lot of people tend to use temporary layoffs as an opportunity to go back to school,” Scott says. As a result, college rentals tend to outperform other residential real estate during a recession.

What happens if a recession becomes a depression?

What if we see not just a recession, but an economic depression—or a significant drop in GDP over several years? In that dire scenario, hundreds of billions of dollars in loans would be defaulted on by everyone from large corporations to individuals and households. A bank’s main concern at that point would be just staying solvent; running out to lend more money would be unthinkable.

There’s evidence that banks are hesitating: Mortgage rates are actually creeping higher, despite large drops in benchmark bond rates. A surge of mortgage refinancing applications have outstripped the amount banks want to lend out. Essentially, banks and lenders want to disincentivize new applicants by raising the interest rate.

This may only be a temporary pause, but we just don’t know when travel, work, and social restrictions will be lifted—so expect mortgage rates to move more based on lender morale than on the benchmark rates.

One potential silver lining: Rental rates traditionally aren’t impacted much by a recession. That model could go out the window if the economy gets into a multiyear slide, with unemployment rates of 15% or more.

However, in the 2008 recession, rental rates for three-bedroom apartments actually rose, despite the steep drop in real estate prices. Demand for rental units increased as people downsized from homes, and the recession’s relatively short timetable—helped by massive government stimulus—kept the rental market from experiencing drops in average rates.

So what should investors expect?

Real estate investors shouldn’t feel pressured into FOMO-fueled recession investment snap decisions. History suggests there will be plenty of time to carefully assess one’s options—and that time will be best spent seeing how fast the economy rebounds.

The best recession outcomes

If a recession fades out quickly, we may see limited damage to the economy. Positive potential outcomes include:

• Only one or two quarters of “base recession,” with a strong showing in the second half.
• Equity markets quickly stabilize.
• Real estate prices remain flat and don’t drop more than 1% or 2%.
• Lenders stay involved in the mortgage markets thanks to easy access to capital from the Federal Reserve and a moratorium on evictions and foreclosures.
• Labor market remains intact, with only a small spike in layoffs and job losses.
• Pretax incomes stay flat instead of falling.
• Interest rates remain lower for longer, bringing more real estate buyers to the table.

The worst outcome

Unfortunately, due to the unpredictability of recessions, we can’t guarantee all of the best outcomes. When planning your investment strategy, it’s important to consider the following possibilities:

• Protracted recession lasting three or more quarters.
• Large spikes in job losses leading to mass unemployment.
• Reduced hours and take-home pay limiting consumers’ economic activity.
• Plummeting consumer confidence.
• Spike in vacancy rates straining real estate investors without cash reserves, especially in hard-hit areas.
• Drop in new home starts, further reducing residential real estate activity by removing a new supply of product to sell.
• Mortgage rates rise to reflect lender risk concerns, causing homebuyers to pause their search.
• Real estate prices fall by 7% to 10%.

Assessing your recession-ready investment portfolio

Now is a fantastic time to assess your portfolio as a whole to ensure that it’s recession-proof. But first, remember: Making reactive, ill-advised moves is never smart, regardless of whether we’re in a recession or an expansion. Take the extra time to document all your assets in one place and monitor your cash flows closely. You never want to be rushing to the table to get a real estate sale done. Never.

Stocks and bonds are more liquid than real estate, which can be good and bad. The good is easy to understand—liquid is great if you need cash in a pinch. And people’s ideas of what it means to “be in a pinch” can change a lot during a recession.

Pros of stocks and bonds

• Potential for high returns
• Historically strong performance
• Liquid

Cons of stocks and bonds

• Drawdowns can happen fast
• Takes time to conduct due diligence on new investments

Let’s compare that to the pros and cons of real estate investing.

Pros of real estate investing

• Diversification from stocks and bonds
• Tax benefits
• Monthly cash flow (if you own rental property)

Cons of real estate investing

• Illiquid
• Prices move slowly

Real estate has some additional benefits—especially when risker markets like stocks are spilling over. Prices on real estate assets are more market-to-market. They’re not priced and re-priced every second of the day like stocks and bonds. And for most long-term investors, having an asset in place for three-plus years brings a lot of peace. It takes some of the pressure to make a fast decision out of your hands.

Time is always the long-term investor’s ally.

Which recession-proof real estate investments to choose

This section contains excerpts from Recession-Proof Real Estate Investing by J. Scott.

The most common arenas where real estate investors choose to operate and specialize in include:

• Flipping
• Wholesaling
• Single family buy-and-holds
• Multifamily
• Private and hard money lending
• Note investing
• Commercial real estate

While most of these focus areas will work to some degree during any part of the business cycle, some are more effective during certain phases than others. To optimize your investment plan at any given time, you need to be flexible and use the strategy that’s most effective and profitable based on the current market conditions—not just one that you happen to like.

If you can only master one strategy because of limited time, comfort level, or capital base, then understand that there will be times when it’s best to just sit on the sidelines and wait for the market to come to you.

Patience is never a bad strategy.

Flipping houses in a recession

Flipping is the process of buying property below market value, adding value through renovation and/or repair, and then reselling it for a profit. Because flipping requires you to buy low and sell high, the best times to use this strategy are when property values are increasing, which typically occurs during the recovery and expansion phases.

If you try to implement a flipping strategy when property values are decreasing, you may find that the dropping values eat through your profit before you’re done with the project, leaving you stuck and either breaking even or losing money.

House flippers have a tremendous opportunity during the recovery phase, which occurs shortly after a downturn ends. This is a great time to pick up easy deals in locations where it’s easier to resell, find contractors eager for work, and start scaling a flipping business that has the potential to grow throughout what is typically several years of economic recovery and expansion.

Of all the strategies we’ll discuss, flipping is the one most affected by the market cycle, which is why it’s important for flippers to understand other strategies and either:

1. Transition to another strategy when the market doesn’t support flipping.
2. Sit on the sidelines when the market is declining.
3. Be ultra conservative if you continue to flip near the cycle peak or during the recession phase.

Wholesaling real estate during a recession

Wholesaling is the process of finding and/or negotiating the purchase of property below market value and immediately reselling it or the contract to another investor for a profit. Good wholesalers can negotiate prices that are low enough that they can resell for a profit, while also allowing their buyer to generate a profit as well.

Wholesalers must buy low and sell high just like flippers. But wholesaling has some additional requirements that must be met for the strategy to be effective.

• Wholesalers most often sell to flippers. So wholesaling will be most viable during phases of the cycle when flipping is viable.
• The best opportunities for wholesaling exist when deals are exceptionally difficult to find. Otherwise, flippers and landlords will find their own deals without the need for a wholesaler.
• Wholesalers need to pay even less for properties than flippers because both the wholesaler and the flipper must be able to mark up the price of the property when reselling to make a profit. This can be nearly impossible in both an extremely hot market (many buyers seeking deals) and in a market where property values are declining.

Wholesaling is possible during all parts of the cycle. But because of the additional requirements listed above, it’ll be most successful in the phases where flipping works: the early recovery phase when coming out of a recession and the ensuing expansion phase.

Single-family buy-and-hold rentals during a recession

Buy-and-hold involves purchasing a property and renting or leasing it to a tenant who pays for the use of that property. When done properly, the rent paid by the tenant covers all costs associated with holding the property. Hopefully, it also generates additional income that becomes the investor’s profit, along with some property appreciation over time.

Like flippers and wholesalers, buy-and-hold investors want to buy low to maximize their earnings—but unlike those other investors, they don’t need to sell the property right away. Instead, they want to buy at a price where they can make a profit on the rental income each month, presumably for a long time into the future. Good buy-and-hold investors are only interested in low purchase prices. For that reason, a buy-and-hold strategy is often best during the recession and recovery phases.

During these two phases, prices tend to be at their lowest, as other incremental buyers may be scared off or biding their time. Oftentimes homeowners (and even investors) want to get rid of their properties and are willing to sell at a discount. Also, during these phases, there’s less competition from flippers and wholesalers, who can often pay more than buy-and-hold investors can afford to pay, especially in upfront cash.

In addition, we frequently see lower interest rates during the recession and recovery phases, which means lower financing costs if you get loans on your properties. Unfortunately, these lower financing costs come with the additional complexity of getting loans during these periods. Banks often tighten their lending standards during downturns, but if you can qualify for loans, you can often lock in great long-term rates. This strategy works best for investors with high FICO scores and low debt-to-income levels, which makes them most attractive to lenders.

Multifamily investing during a recession

When we talk about multifamily investing, we’re typically referring to the purchase of properties with five or more residential units. This could be a small eight-unit residential apartment building, an apartment complex with hundreds of units, or anything in between.

While we talk about multifamily investing as one strategy, multifamily investing can actually be broken up into two common strategies.

1. Buying for cash flow. Cash flow in the multifamily space is essentially the same as buying single-family rentals. The investor is purchasing the property for income well into the future. These investors prefer the scale of buying many units at one time and in one place, rather than purchasing several single-family units.
2. Buying as value-add. This is the apartment equivalent to flipping single-family houses. When we purchase a single-family home to flip, we are typically buying something that is in poor physical condition, renovating it, and then reselling at a profit based on the physical renovations we’ve done. In the apartment world, instead of just doing physical renovations, we are improving the financial performance of the property as well. We do this by fixing management, increasing rental income, and lowering expenses. We can then resell the property at a lower cap rate, which translates to a higher price.

The value-add strategy is often done as part of a syndication, which is a group of passive investors putting money into a project run by a syndicator. The syndicator is an active investor (typically the largest stakeholder in the deal) and is responsible for sourcing and executing on the deal and earning everyone, including themselves, a profit.

Like single-family rentals, buying multifamily properties for cash flow will work during any part of the cycle. However, this strategy will be most successful when it’s possible to purchase at low prices.

In the multifamily world, cap rates are intertwined with property values. When cap rates are high, prices paid for, or offered by, buyers will be low. This is common when interest rates are high and when sellers are getting desperate to get rid of their properties. Like with single-family, this is going to occur during the recession and recovery phases.

Private and hard money lending during a recession

Private lenders don’t lend professionally but do lend to investors, who might be family members, friends, or investors they know and trust. These are individuals who often use money from their retirement accounts to invest in something other than the stock market. Or they may be investors who simply want to diversify their investments in taxable accounts by passively lending to other real estate investors.

Hard money lenders are typically professional lenders who secure their investments with the borrower’s property. They have less of a relationship with the borrower, and are susceptible to risk should the value of the property—their collateral—drop.

Private lending can work in any part of the market cycle, especially for those lenders who can underwrite a wide variety of deals. Many successful lenders will diversify their portfolio and lend to different types of investors such as flippers, builders, buy-and-hold landlords, and commercial investors. If more investors are focused on buy-and-hold deals, good lenders will adjust their strategy to support these types of loans; if investors are focused on new construction, good lenders will figure out a lending strategy that incorporates new construction loans.

But that doesn’t mean the phases of the cycle don’t impact lenders’ profits and margins. They do. Buyer demand for property impacts lender profits, and interest rates impact lender margins. When interest rates are high, lending profits and margins will be higher than when interest rates are low and cheap money is readily available.

During the recessionary and recovery phases, when there aren’t many professional lenders in the mix and some lenders are scared to deploy their cash, private lenders may be able to generate 6% or more above bank rates, plus several “points” upfront, on their loans. But during the expansion and peak phases, when lenders are fighting each other to loan money to investors, lenders often have to make loans that rival bank rates with few fees or points.

Note investing during a recession

A mortgage agreement is a kind of note. There are many different strategies around buying, selling, and holding notes.

A few of the most common strategies include:

• Selling property using seller financing and collecting cash flow from the note that’s created from the loan.
• Buying “non-performing” notes where the borrower isn’t paying as promised at a deep discount and then negotiating repayment with the borrower or foreclosing on the property.
• Creating or buying a note and then selling off part of the note for cash in hand, while also still getting monthly cash flow from the remaining stake in the note.

In addition, investors may purchase notes in either first position or as junior liens. A first position note is entitled to payment first should the borrower default—mortgages, for example, are typically first-position loans. If the property is foreclosed upon or the borrower is forced to settle debts as part of a bankruptcy, the first position note holders will be the first to get paid. This is the most secure position.

Junior liens are not in first position. This means that the note holder may not be able to foreclose or even get paid should the borrower default. They will typically only see a return if they can convince the borrower to pay or if there is money left over after the first-position note holder has been repaid their entire balance. If the first-position note holder isn’t fully paid off, the junior lien holder will typically receive nothing.

Like lending, notes can be a profitable part of an investment portfolio during any part of the economic cycle, with different strategies providing advantages and disadvantages at different times.

Investing in commercial real estate during a recession

Commercial investors focus on various types of real estate other than small residential properties or land—which is sometimes considered commercial investing, too—including:

• Multifamily (apartments)
• Retail space
• Mobile homes
• Office space
• Warehouse space
• Self storage

Nearly all commercial investing relies on income from regular lease payments, just like in the buy-and-hold strategy. For that reason, the commercial strategy follows many of the same cycle rules: The purchase price is the most important, and there’s no desire to sell the property right away.

There are a few big differences.

• Commercial properties are often much more expensive than single-family residentials, and commercial lending is typically tightest during the recession phase. While commercial investors can often get good deals during a recession, it’s usually difficult for them to find lending. Because of this, it’s often better to implement a commercial strategy once the economy has shown signs of recovering. At this point the lender’s purse strings should start to loosen up and improve borrowing terms.
• Many commercial investors rely on private investors, like syndications, to fund part or all of their deals. Because of the reliance on individual investors, commercial investors are most likely to be able to put together these deals during times when smaller individual investors have access to cash and a willingness to risk that cash on a real estate deal.
• Commercial property investments often focus on areas more recession-resistant than residential property investing. Some areas of commercial property actually thrive during recessionary periods—for example, self-storage facilities often see a sharp rise in demand during a recession, simply because more families are moving in together or moving into smaller spaces and need a place to store their extra stuff.

Focus on the purchase of traditional commercial investments during the recovery and expansion phases. And then focus on the purchase of recession-resistant commercial assets as the economy starts to turn south—it’s a good diversification strategy away from riskier investments like stocks at this point.

How to make the best use of your time during a downturn

An economic slowdown is a good opportunity to build a strong real estate investment support system and carefully think through your strategies. Proper planning gives you a head start once the economy begins an upturn. Market dislocations—when fear separates prices from their underlying value and cash flow generation—are the best time for a prepared real estate investor to carve out an amazing deal.

Here’s where to start.

Increase your investing knowledge base

How do you learn best? BiggerPockets offers a number of ways to learn about real estate—no matter whether you’re socially distancing at home or out on a run.

Start networking

While we love all of the great resources offered on BiggerPockets, investors can’t skip one of our most popular tools: the BiggerPockets forums. Pick the brains of real estate investors just like you—and pros who’ve brokered hundreds of deals.

Our local forums allow you to connect with nearby investors, agents, brokers, and lenders. Have a question about the market in your area? You’ll find all the information you need.

Check out our events page for virtual and in-person events, where you can meet investors, contractors, and potential business partners. A good team is essential to real estate investment success—so start choosing yours.

Dig into data

When you’re ready to start diving into the real estate market, make sure you know exactly what you’re diving into. Think about the type of investing you want to do, whether it’s wholesaling, buy-and-hold, commercial investment, or fix-and-flips. Then, figure out what pieces of data are going to be the most impactful to your investments. Not sure what data you need or how to interpret it? Ask the BiggerPockets forums.

Speaking of data: Pay close attention to economic data. No big decisions should be made until we see how many jobs are lost, and worker hours lost, as we head into the summer months. Unemployment rates, especially in certain metropolitan areas, will be an important driver of average rent prices in related zip codes. The same goes for the average value of residential homes sold and commercial properties transacted.

Another key data point in the next 12 to 18 months is the Consumer Price Index (CPI), which measures inflation. Inflation spikes can drive mortgage rates higher. When the CPI demonstrates a growth rate of more than 4% annually, expect higher mortgage rates soon.

Be patient—but pay attention

Stalk your real estate prey, but be willing to be patient for that next deal. What seems like a “great deal” because it’s 5% cheaper than it was a month ago may end up being 15% cheaper two months from now.

Need something to work on during your search for that next great deal? Build your reserve fund. You can never be over-prepared in reserves. Recessions can be frightening, but don’t let them crush your investment dreams. Make smart real estate decisions and refuse to panic. With time, your net worth will increase—and you’ll be better-prepared to weather the next storm.