10 Ways Real Estate Investing Could Get You Through a Recession

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10 Ways Real Estate Investing Could Get You Through a Recession

Getting through tough economic times

Is a recession coming? That's the big question. Many economists have sounded recession warnings for months, but even so, we can't say for sure that a downturn is imminent. But if you're worried about a recession, real estate could be a great investment. Here's why.

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1. You can use your rental property income to cover expenses

If you own a rental property, you may be used to reinvesting your rent payments. But if you need that money to cover your living costs during a recession, that's an option that could help you avoid debt if, say, you were to lose your job.

ALSO READ: Rental Properties Are Lots of Work. Here Are 2 Effortless Passive Income Investments.

2. You may be able to raise rents if you need to increase your personal cash flow

Raising rents won't always work during a recession because tenants can be cash-strapped when economic conditions are poor. But if you own a rental property in a hot market, you might manage to get away with raising rents to increase your cash flow when you need to.

3. You can sell an income property for cash

Home values don't always drop when recessions hit. If a serious need for money arises and you're not smack in the middle of a lease, you could potentially sell a rental property for cash. That could afford you the option to leave your remaining investments alone rather than risk liquidating them at a loss.

4. You can occupy a rental property you own outright and save on housing costs

Your personal financial situation could deteriorate during a recession. But if you're coming to the end of a lease, you may have the option to occupy one of your rental properties. If that home is paid off, you won't have to deal with mortgage or rent payments and could save money.

ALSO READ: Do My Rent Payments Affect My Credit Score?

5. You can collect dividend income from REITs

Investing in real estate doesn't refer only to owning rental properties. You could also buy real estate investment trusts (REITs), which tend to pay higher-than-average dividends. And that's additional income you can use as needed.

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6. You can sell REIT shares to drum up cash

It often pays to hold on to REIT shares for a long time so they gain value. But if you need money, you may be able to sell some of your REIT shares at a profit. You'll give up some dividend income, but you'll get more of a lump sum of money at once.

ALSO READ: 3 Reasons to Load Your Portfolio With REITs

7. The value of your income property might hold steady even if stocks crash

Real estate values don't always follow stock market movement. If a recession hits and stocks crash, your rental properties might manage to hold their values. That could give you more cash flow options and peace of mind.

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8. Your REIT shares may not lose value the same way your other stocks do

It's easy to see why some stocks lose value during a recession. When consumer spending declines and revenue shrinks, share prices tend to reflect that. But some REITs, like healthcare REITs, are fairly recession-proof -- namely, because people will always need to visit medical facilities. That buys you some protection.

ALSO READ: 3 Recession-Proof Real Estate Investments for Your Portfolio

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9. You can take out a home equity loan against one of your income properties

If you own a rental property (or more than one), you may be able to borrow against the equity you have in it should you need money. Home equity loans can be an affordable way to borrow. And they can be fairly easy to qualify for as long as that equity is there.

Home equity line of credit documents on a table.

10. You can access credit via a HELOC

If you need borrowing flexibility during a recession and own a rental property, you might qualify for a home equity line of credit (HELOC). A HELOC provides access to a credit line you can draw from as needed. And if you're having financial difficulties, that's an important option.

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Set yourself up to survive a recession

A recession is not guaranteed to hit within the next year. But it's a possibility we can't discount. Investing in real estate could be your ticket to getting through a downturn financially unscathed.

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10 Ways Real Estate Investing Could Get You Through a Recession