4 Tips for Recession-Proofing Your Investment Portfolio

Economic recessions are an unfortunate reality that you have to deal with now and then as an investor. As a real estate stakeholder, you are prone to slumps. More so, when you're hardly in a position to tell when a recession will hit. However, some insights forewarn future economic setbacks. Accordingly, providing you the opportunity to mitigate risk as well as granting you an avenue for relatively faster recovery.

If you're worried that another recession is in the offing and could potentially hurt your portfolio, it might be a good idea to consider these four tips

1. Ensure you have ample cash reserves

As a smart estate investor, recessions are not catastrophes. Instead, they are opportunities to purchase properties at fairer prices.

Fundamentally, to be able to acquire property during a recession, you require sufficient resources. Thus, your cash reserves should remain stashed for a rainy day.

2. Invest in properties situated in stable neighborhoods

Stable neighborhoods are economically diverse. These are common areas that easily attract renters.

Investing in these neighborhoods will have you experiencing less impact from a market downturn as they produce consistent cash flow.

3. Get rid of Risky Investments

If you own any risky real estate investments, you should get rid of them. You have to be ready for a dive in rent rates. If you hold a property that can't withstand the adverse effects of a recession, now is the best time to get rid of it and bank your resources while you wait to take advantage of a better investment opportunity.

4. Set long-term Strategies

Always focus on the bigger picture. Set goals. What do you want to achieve in the next 15 years?

Economic cycles are variable. For this reason, property values go up and down, but over time, real estate, more often than not—always goes up.

An economic recession doesn't always have to be doom and gloom for your real estate investments. Evaluating your property allotment scheme, reallocating, and finding recession-proof investments can make your portfolio less vulnerable to significant market swings and economic crisis.

Pros and Cons of Pier and Beam VS. Slab Foundations

Introduction

These two types of foundation are common in different states. Their structural integrity depends on a number of factors including the home's age, the ground on which it stands, the general area, and recent severe weather. Let us look at each type.

1. Pier and Beam (aka Raised Foundation)

This foundation is built on a series of concrete posts driven vertically into the ground (piers.) The beams are horizontal posts lying across the piers, and on which the property is built. The space between the ground and the floor is the crawlspace. Crawlspaces have advantages and disadvantages.

Advantages

• The space under the floor is where the electrical cables, plumbing lines, and underfloor HVAC ducts are found.
• This makes inspections and repairs easier just because an inspector or contractor can easily get in and do their job.

Disadvantages

• Vermin, insects, and burrowing creatures can make the crawlspace their home.
• Dust and spores often accumulate resulting in allergic reactions.
• Rainwater can seep in encouraging mold and can make repair work difficult if the ground is sodden or flooded.

2. Slab Foundation

Builders often choose slab because it is easier and cheaper. There are two types of slab:

• Basic flat concrete.
• Wafflemat. This has a flat top and the underside looks like a waffle. The spaces in the "waffle" allow for soil expansion and contraction, so cracking in walls should be less common. The criss-cross ridges deliver stability. If possible, an investor should know how far apart the criss-crossing is. The builder will know, if you can make contact, or get a copy of the blueprint. If the spaces are too wide there is less stability.

Advantages

• A well-built home by a reputable builder should be structurally sound.
• It is a lower-cost construction system, so the home may cost less to buy.

Disadvantages

• If the criss-cross is too wide, the foundation will be less stable and may encourage cracking. The soil-type and general weather conditions will also affect stability.
• Plumbing lines are underneath the floor and encased in concrete. Any repairs, therefore, mean holes have to be drilled into the foundation before repairs can be made.

The Takeaway

The wise investor will research the foundation type to see what it is. A long-term resident may know what damage there has been over the years, as will public records if permits were needed to correct a failure. It is impossible to estimate potential repair costs but the better the original work, the higher quality the materials used, and the ground on which the property stands, the general location and recent weather phenomena (flooding, etc.) will all affect likely future repair costs.

Investors should hire a well-qualified inspector who knows the locale to assess structural issues, and a WDO (pest) inspector, particularly to look at the crawlspace.

ROI For a New Fence

Whether you're buying and flipping a home or investing in a new property, it's important to understand different ways to maximize your financial stake. One of the most common things that people examine when looking at a property as a buyer, renter, and investor is the condition of the structure. Yet, before one gets to the front door, they often pass through a fence, a security barrier or property marker that gives a first impression of the property. Here is a brief look at the importance of a fence in real estate investing, when it's a good time to replace the fence, and the ROI that you can expect.

Why Fences Matter

Many homes on the market today are being sold to people in their early 30's who are finally moving out from mom and dad's and into their own place. They are bringing pets and small children with them, so having a fence on the property is comforting but somewhat necessary in many cases. As a real estate investor or seller, it's a good idea to have a fence that is attractive and effective for security and privacy on the property or to consider replacing an existing one to be more useful.

When Should I Replace the Fence?

There are times when you will have an existing fence on the property that you're selling or renting, but that fence might not be the right one for your needs. There are several times when you should consider replacing the fence that is on your property including some of the following:

• Missing panels in a PVC fence
• Damaged or rotten wooden fences
• A fence made of materials that are inferior to those of the neighboring fence. 

In short, you want your fence to be free from damage, be effective at its purpose, and look as good or better than the neighbor's house. If your neighbor has basic railroad tie fencing, then it might not be a bad idea to look at something more appealing like PVC.

What Is the ROI on Fence Replacement?

The question that lingers on the mind of every real estate investor is: how much can I expect to get out of my investment? According to estimates by Forbes, the average ROI for a fence on a single home property is between $1,500 and $4,000, with the ROI increasing with the quality of the fence. So, while you might spend over $1,000 to get a quality fence, the fact is that you should get much more in return. In addition to the home value, the overall look of the property with a fence will make it much more appealing to potential buyers.

It's clear that replacing a fence on a property can have a major impact on the security, looks, and value of a home. While it might be an added investment that some people don't plan on making, it is nonetheless important. After all, with the average ROI being between $1,500 and $4,000 for a home for sale, home sellers should be eager to replace the fence. Overall, fences are a very good investment project that can add value to a home and give potential buyers a good first impression.

Who Should Walk Through a Potential Property Before You Buy It

Wise Investing

You see the right potential property for the right price in the right place. You decide to write an offer on terms that suit both your immediate and long-term investment goals. Unless you are an experienced general contractor, it will pay you to get expert opinions on major elements of the property. There are two primary reasons for this. You want to:

1. Avoid investing in a property that will, either immediately or soon, need additional investment in major repairs and renovations.
2. Ignore the possibility of negotiating a lower price or to have the current owner pay for those improvements.

Who Should Walk Through the Property?

There are some obvious professionals to hire:

1. A Licensed Home Inspector

Many people become licensed home inspectors and can do a first-class inspection. Unless you know a trusted professional, you may want to interview members of the American Society of Home Inspectors (ASHI). ASHI members are not only skilled and experienced, but they work to a high set of published standards. They also keep up to date with changes to building code.

2. A Building Contractor

Licensed contractors understand current building code. They also know how to investigate structural issues such as walls, roofs, and foundations for potential or current failure. While the roof, for example, may pass a home inspection because it is "safe and functional" on the day of inspection, the shingles may be coming towards the end of their useful life. Replacing a roof in a couple of years will be expensive.

3. An HVAC Specialist

The A/C and furnace in a home work hard all year long. Most owners and tenants change the filter but fewer have semi-annual inspections. Inefficient systems cost more to run, and that may be a sign of future failure. An HVAC professional will check out everything including if the condenser has enough refrigerant, and what type of refrigerant. Many municipalities want to get rid of old refrigerants, so topping-up will cost more and, one day, the condenser may have to be replaced completely.

4. An Electrician

Replacing GFCIs is no big deal, and making sure the home is properly "grounded" is also easy. But older homes may have, say, some aluminum wiring which will have to be replaced if any future renovations are done. A previous homeowner may have installed new wiring that is not up to current code, so there could be a potential fire hazard to look out for.

5. A Plumber

Old pipes and water heaters may increase the possibility of a future leak. No landlord wants to get an emergency call about a damp ceiling or a flooded basement. In addition, some older properties were plumbed with, for example, KITEC water lines. KITEC is no longer approved material, so apart from potential leaks, a plumber will not be able to alter the system in any way if you ever wanted to renovate or install a new bathroom for example.

The Takeaway

Investing is a great way to create wealth, and owning good properties is a good way to help a community look good and attract good tenants. Checking important structural and functional items before the final agreement is both a sound negotiating strategy and a safe investment process to adopt.

Common Code Violations Found in Older Homes

When looking at older houses that appear to be good candidates for buying and flipping, real estate investors have to be careful. After all, you're going to be doing home repairs or having them done on your behalf. As such, you need to be aware of the different common code violations that are frequently discovered in these older buildings. Throughout this article, we'll show you five of the usual suspects for code violations that you can expect to run into while getting your new house ready for market. 

Lack of Ground Fault Circuit Interrupters

The first issue that people find when buying older homes to flip is that they don't have the necessary ground fault circuit interrupters, often called GFCIs. These are often necessary for outlets in places where moisture is common, such as kitchens and bathrooms, so as to prevent electric shocks. When a surge of electricity trips the GFCI, the electrical current is shut off and a person avoids a potential injury. It's important to double-check for these outlets when buying a home.

Asbestos in the Home

Asbestos was a common building material in homes built before the 1970s. If you're buying an older home, you need to be on the lookout for asbestos because it has been found to be a very harmful material that must be removed. Although it's not difficult to get a home tested for the presence of asbestos, it can be rather expensive to remove from the home because of all the necessary safety precautions needed to ensure the process is safely completed.

Deck Safety

The 1980s and 1990s were a time when people built a lot of decks onto their home. The most common issue that people have when buying homes from this era is that the guardrails on the deck have to fall in line with modern building codes. Essentially, the guard rail has to be a minimum of 36 inches in height for any deck that is 30 inches above grade. It's a simple fix, but it's one that inspectors love to check, so make sure your deck falls in line.

Peeling Lead Paint

Although it has been outlawed for years, lead paint is still an issue in older properties. Since peeling lead paint is one of the most common causes of child lead poisoning, it's absolutely crucial to take care of this code violation before buying a home. Like asbestos, there are certain measures that must be taken to properly dispose of lead paint, but it is worth getting a contractor to take care of it so you can confidently sell the home.

Lack of Egress Windows for Living Spaces

As more and more adults moved back in with their parents, there has been a frenzy of basement conversions taking place. What was once an unfinished basement is now a bedroom and living space. The only problem is that these are often done without the proper permits and without the required egress windows. If you're going to buy an older home with a living space in the basement, you need to have an egress window for emergencies and make sure that no other code violations are present.

As you can see, there are several different code violations that can cause setbacks and unneeded expenses when you're buying an investment property. We've looked at a lack of GFCIs, the presence of asbestos, deck safety features, peeling lead paint, and DIY projects like basement renovation. While it can be difficult and time-consuming to update these elements in a home, you'll need them fixed in order to sell the house without issues.