Owning property is a great way to fix your housing expenses, maintain personal geographic stability, and build wealth through appreciation. The last decade has given these benefits to homeowners across the nation, courtesy of one of the longest continuous periods of economic growth in history. But it is important for us all to remember that there is always a potential for an economic slow down. Experts have pointed at consumer debt, student loans, federal debt loads, trade wars, and most recently the coronavirus as harbingers of the next recession. Regardless of whether they prove to be right or not, it would be wise to take stock of your real estate holdings and consider if you are in the position you want to be to weather the next economic storm. Here are a few of the questions that are good to ask yourself.
Is your current property one that is meeting all your needs both now, and for the next 3 to 5 years? You want to be in a property that meets your needs, as well as any future needs you may be considering, such as a new baby, or caring for an aging parent at home. Perhaps you are considering retiring, and are ready to downsize pocketing some of that equity you have built up over the past decade. Addressing issues like these now is much easier while you are in a stronger financial position, and your property is at its most valuable.
Is your mortgage a fixed interest loan at the current market rate or lower? Staying in place during bad economic times can be easier if you make sure you have the lowest possible payment. A fixed rate means you know your payment won’t change regardless of any local or global financial instability. After a few years of incredibly low interest rates, I still occasionally encounter clients who have mortgages at 5% or higher rates. Locking in a lower rate is a great way to reduce your monthly expense and have more cash on hand in the event you need it.
Are your investment properties in locations less prone to volatility? Make sure that any rental property you own is located in a location with historically low vacancy rates, and a diverse local economy. Having a long term tenant in an area like this isn’t necessarily as exciting as a vacation rental in a popular vacation spot, but during times of economic upheaval, it will be more likely to continue producing income with less effort and volatility, and will hold its value better.
These are just a few examples of what to consider as a property owner, pondering the tea leaves of economic uncertainty. I encourage you to ask yourself these questions and more. If you want to go over your personal real estate position with a professional and evaluate your options, please contact me.