Are there still opportunities in a weakening market? Yes.

We may be entering the “winter” of our economy, with inflation at an all-time high, mortgage rates skyrocketing, demand lessening, more inventory and a looming recession, but there are still opportunities to win in a down market with the right strategy.

As a new or established real estate investor, now is a good time to reassess your investment strategy. If you’ve been building passive sources of income to supplement your current income and possibly retire early with your real estate investing strategy, you’re already ahead of the game. If you need money now or you have little cash to invest but want to get started investing, you’ll need a different strategy that allows a faster buildup of equity.

Creating cash flow and building wealth in a deliberate, purposeful way can be achieved by purchasing real estate investments that provide housing for the growing rental population, as more people are unable to afford housing or may have changes in income due to the recession. In today’s turbulent economy, however, you need a slightly different strategy rounded by your own preferences and investment style.

Is buy-and-hold a good strategy now?

Buy-and-hold strategies using value-add properties is the best way to create wealth over time, and now may be an even better time to hold properties. Adding value by making improvements in a modest way so that you can increase rents and decrease your expenses over time has been challenging with the supply chain issues ushered in with the pandemic. However, those supply chain issues will resolve more rapidly as demand weakens and the build-up of orders allowing you to improve properties that warrant improvement flood in. Your net cash flow will grow and accumulate with each additional unit you add to your portfolio and for each property you improve. It only takes one building to create a steady stream of cash flow to open up the flood gates of opportunity for future purchases.

In prior strategies, the equity position on an existing property or portfolio allowed you to purchase more value-add properties to your portfolio. However, such a strategy may need to carry more caution as we enter an economic downturn with recessionary practices. The tactics of inflating prices and passing them onto the consumer may be a short-term win for companies, however, the tolerance by the consumer will hit a cap. Companies will then turn to laying off the workforce while reducing the rate of wage increases to maintain their profit margins. This is happening right now.

Investors must be more vigilant

Investors should look beyond “the next property” when safeguarding themselves when the economy enters a “winter.” Things to keep in mind during a recession and the economic conditions we face now and will continue to face over the next 12-18 months include:

• Sensitivities to your target tenant. Is your current tenant population subject to layoff? Will the income source current tenants have change? As a landlord offering tenancy or wanting to retain good tenants, what can you do to make your property the more appealing choice?

• Sharp awareness of inventory. Watch how the current inventory of the market you’re investing in changes. Notice pricing fluctuations. Notice the increased days on market. Watch the types of properties that come on the market and how it is changing.

• Temper your purchases. There will be more distressed properties that enter the marketplace that will tempt investors to jump on and add to their portfolios. Patience prevails as sometimes distressed properties require more work and have “hidden” issues that a healthier, more competitive marketplace could tolerate.

• Look at the long-term. When reassessing your overall investment strategy, look at all income sources—from retirement, stocks and bonds to other sources of income. Although the stock market is currently in a downward slide and many retirement accounts are being diminished, real estate will also take a hit in value. Your current portfolio may have properties that have greatly appreciated not only from the improvements you’ve made, but also because real estate in general has appreciated overall. Home prices go up, rents go up. What goes up, must come back down. But to what degree? It’s unknown, which is why you must prepare carefully and assess your outlook over the long term.

• Real estate market normalization. The real estate market has been overinflated for longer than normal and experts are predicting a housing normalization that will be directly influenced by economic factors and policies. Because of this unpredictability, reinforcing your current portfolio and strengthening relationships with your vendors and tenants is critical to weather the changes.

By taking the time to step back and weigh the overall marketplace, downturns and uncertainty of the next 12-18 months, you may realize that it is a good time to wait on your next big purchase—or jump on a property that’s perfectly suited to enhance your portfolio now. The only way to make the best decision is to look at all of the factors influencing the real estate market and general economy and how it measures up to your investment risk tolerance. Only then will you be able to make the right decision so you can get a good night’s sleep because you’ve invested well in real estate as a hedge against economic downturns.