How Real Estate Brokers Can Prepare For A Recession
Anyone in the real estate market is aware of the upcoming recession. The Federal Reserve is working to rein in inflation. In fact, it raised interest rates by 0.75%. With increased interest rates and inflation, few people will be spending money investing in real estate.
With the last recession, the active real estate population declined by 35% from 2007 to 2014. Basically, more than 94,000 people dropped out of working as real estate agents. This is because they were unable to survive the harsher market brought by the recession.
Economists and financial experts forecast that the next recession will be in 2023. As a real estate agent/broker, are you prepared for the recession?
In this post, we share tips on how real estate brokers can prepare for a recession.
1. Cut Your Expenses
In a recession, few people will be buying or selling homes. As such, commissions will not be flowing to your bank account like before. It‘s important to ensure that you’ve got a handle on your money.
Marketing is the most effective way to promote your real estate business. But in a recession, spending thousands of dollars to market your business is not wise. Instead, you should cut your expenses and save money for use after the recession. If you’re going to spend money, make sure there is a specific financial return. If not, trim the expenses to save money.
2. Improve Your Client Relationship
With the economy changing, it‘s necessary to change your relationship with your clients. Your client relationships are key to helping you survive the recession and beyond. Without clients, you won’t have buyers and sellers to service. This also means no commissions for properties sold.
As such, you should improve your client relationship and continue servicing them. This is because the market will change on the positive, and the client relationships you built will boost your business.
3. Have a Financial Safety Net
With few commissions during a recession, it‘s important to have a financial safety net. This will enable you to keep your real estate business afloat. If you have rental properties, you can get a Rental DSCR loan. Best for condos and multi 5+ properties, you can receive $75,000 to $5 million or up to 80% of the purchase price. You can also consider Bridge and Ground Up Construction Loans.
Rental loans can act as a backup in the event that closing or commissions are not flowing into your bank account. By leveraging your rental properties, you can improve your cash position and ensure that you don’t close shop during hard times.
Remember, don’t stop promoting your brand despite economic hardships. If some of your marketing efforts are expensive, turn to social media marketing and brand awareness.
When an economic downturn hits, the demand for one sector of real estate may go down, but another sector may experience an uptick in prices. To survive the recession, expand your reach outside your normal listings. Basically, you should shift your business model outside your normal price ranges and geographic area.
You should also consider joining a real estate team. You’ll receive financial support, and leads that will ensure that you stay in business.