The following is a guest post by Michelle Clardie. Michelle is the author of The Recession-Proof Real Estate Agent: How Savvy Agents Are Finding New Opportunities in Slow Markets. She is also the Founder of Key Real Estate Resources, which provides useful tools and actionable advice for modern real estate professionals. Visit KeyRealEstateResources.com for free checklists, templates, and business planning resources!
With mortgage interest rates exceeding six percent, the economy is on the brink of a recession and your income can wax and wane. And while recessions are a normal part of the economic cycle, they do create complications for business owners. Real estate professionals are particularly susceptible to recessions because their incomes are directly tied to the performance of the real estate market.
After several strong years, the housing market is slowing substantially as increasing interest rates decentivize buyers. And with lower buyer demand, home values are declining in many markets, preventing homeowners from listing their houses for sale.
But there is some good news.
First, recessions are temporary. We just need to wait them out. Secondly, there are things you can do to supplement your real estate income while fewer buyers and sellers are in the market. And, no, we’re not going to ask you to take a part-time job or hustle in the gig economy while you wait for the market to rebound. With a little strategic planning, you can recession-proof your income while growing your real estate business.
Here are five recession-proof income streams for real estate professionals.
With these five income-generators, you’ll grow your business while further establishing yourself as _the _local real estate expert.
Depending on your local market, property management or apartment leasing can be exceptionally lucrative. Renters move more often than homeowners, so they’re in the market for a new residence more frequently. And, sadly, during a recession, there is often increased demand for rentals as foreclosure increases and faith in the housing market remains weak.
This creates an opportunity for real estate professionals who normally focus on buyers and sellers to expand into rentals. In competitive markets, like New York City, rental agents are commonly hired by renters to find appropriate living spaces. Similar to working as a buyer’s agent, you would scout locations and conduct property tours. In all markets, property managers are commonly hired by property owners to handle the marketing of the units for rent, conduct property tours, screen prospective residents, draft lease agreements, collect rents, oversee day-to-day operations of the property, and handle lease renewals.
You’re typically paid a percentage of the rent collected. Commission rates vary widely, but you can typically earn 5-10% of gross rents collected for long-term rentals and 10-20% for short-term vacation rentals (which require more effort due to the increased resident turnover).
During a recession, lenders often tighten borrower requirements because there is increased concern of borrowers defaulting on the loan. This can mean that buyers need a higher credit score to qualify for a home loan. And this comes at a time when credit scores may be taking a hit from financial difficulties caused by the recession.
Offering credit repair services to help buyers qualify for home loans comes with several benefits:
This service typically involves reviewing credit reports to find ways to increase credit scores as quickly as possible. Even if you don’t know much about credit scores today, it doesn’t take long to learn. If your clients have accounts in default, you can contact the creditors to ask if your clients can pay their way out of the default status and have the black mark removed from their credit histories. Many creditors are open to negotiating the payoff amounts because they would rather collect something on the debt than nothing.
In most cases, credit repair agents charge a flat fee for service. But you could also opt for an hourly rate if that works for you and your clients.
You’ll be making a real difference in the lives of your clients, and you’ll be filling your pipeline with future qualified buyers.
Most real estate professionals don’t know anything about property tax appeals. But, like credit repair, property tax appeals are easy for real estate professionals to learn. All you have to do is show your local tax assessor that your client's home is worth less than the value their property taxes are based on. That’s all there is to it! Once you prove the correct value, your client’s property taxes will be reduced accordingly, and you can collect your fee.
When property values are declining, the opportunity for property tax appeals skyrockets because tax assessors continue to tax homeowners at the old, higher values. With a quick comparative market analysis (CMA), you can find the fair market value of the home and submit a property tax appeal to your local assessment appeals board.
Property tax appeals create an intense competitive advantage for those willing to offer the service. Every year, you can review your client’s assessed value (most counties publish these values online) to see if the value should be appealed. If there is an opportunity for appeal, you can get to work. And even if there isn’t an opportunity to appeal, you can earn major brownie points with your clients by notifying them that you have reviewed their property tax bill to confirm that the charges are fair. How many agents in your market are supporting homeowners in this way? When it’s time to sell, these homeowners will remember this service!
Most tax agents charge a commission of 30-50% of the total tax savings. In many cases, this process can be repeated year after year for multiple earnings on the same property.
Learn more about how to make money with property tax appeals.
While the average homebuyer is hesitant to take the plunge during a recession, real estate professionals know that the best time to buy real estate is when buyer demand is low. You know that a recession often means lower purchase prices. And even if interest rates are high, you can always refinance when they go back down. In short, a recession is a perfect time to grow your rental property portfolio.
As a real estate pro, you may already be aware of the many benefits of rental property investing, including:
You might also know that rental properties act as a hedge against inflation. When the market inevitably rebounds, the ability to raise rents, coupled with the appreciation of the asset, will put you in a solid position to weather the increased inflation that comes from a recession recovery.
Having a website is crucial for modern real estate professionals. Your website lends instant credibility to your business and can generate leads round-the-clock. It can also create an independent passive income stream for your business. If you don’t already have a website, check out our free guide on How to Build a Real Estate Website. This will walk you through the process of building your own professional-quality site, helping you maintain complete control over your site while avoiding high web designer fees.
There are a few options for monetizing your site:
Recessions are inevitable. But they don’t have to derail your real estate business. Choose one or two of these recession-proof income streams for real estate pros and prepare to grow your business under any economic conditions that come your way!