Any time the word “recession” is used, the U.S. economy goes into a tizzy, and commercial real estate investors need to make sure they are prepared for whatever happens next. To avoid losses during a recession, there are a few things you can do to ensure your bottom lines are protected.
1. Choose Lenders Carefully
During recessions, lenders tend to cut off lines of credit, even if there is a zero balance on the account. To prevent your credit from being frozen, ensure that credit secured by real estate is set with lenders you have no other loans with.
2. Protect Your Assets
Commercial real estate investors tend to lose assets during a recession because they do not have enough liquidity. To prevent this, ensure your leverage is no more than 50% of your total assets.
3. Refinance is Your Best Friend
It is a good idea to refinance any debt and negotiate covenant default requirements upfront. A covenant default occurs when you fail to make a payment on a debt. By negotiating the requirements for a covenant default upfront, you will have a chance to reduce the total amount of money you will pay over time.
4. Make Recession-proof Investments
Start investing in medical offices and small industrial companies that service particular industries. Stay away from big box stores and mobile homes.
5. Finish Projects
It is important that you finish up any lagging projects quickly. As the political atmosphere gets electrified by the upcoming elections, recession chat will only go into hyperdrive. Focus on finishing up projects or putting incoming ones on hold until the economy settles down.
According to experts, a recession is coming. It's no longer a matter of if, but when. To protect your commercial real estate assets during this time, you will want to make sure you follow the suggestions above. If you have legal questions regarding your NYC real estate, Attorney Melvin Monachan can help. Call 347-389-1682 today or schedule a consultation online.