A recession is, by definition via Oxford, a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. As of the first quarter of 2023, the United States is now in it's third quarter of economic decline which by definition places the country in recession.
While the term recession is a scary term for most investors and the population alike, it doesn't have to be. There are many investment tools that can be leveraged to protect yourself during a recession.
Fractional real estate investing is a relatively new concept in the world of real estate, but it is one that can offer many benefits, especially during a recession.
This type of investment allows individuals to invest in a share of a real estate property, rather than buying the property outright. This can be a valuable tool for people looking to diversify their portfolios and weather the economic uncertainty that often comes with a recession.
One of the primary benefits of fractional real estate investing is the ability to spread risk. When investing in a single property, the investor assumes all of the risk associated with that property. If the property performs poorly, the investor could lose a significant amount of money. With fractional investing, the risk is spread among multiple investors - and in some cases, multiple properties and states, which can help to mitigate the impact of any potential losses.
Another benefit of fractional real estate investing is the ability to invest in higher-end properties that may not be accessible to individual investors. For example, a luxury vacation home may be out of reach for many individual investors, but by investing in a fractional share, the investor can gain exposure to the property without having to bear the full cost of ownership. This allows individual investors to benefit from the appreciation of these properties, even if they are not in a position to purchase the property outright.
Fractional real estate investing also provides investors with access to a wide range of properties and geographic locations. For example, an investor may not have the resources to purchase a vacation home in a desirable location, but through fractional investing, they can gain exposure to multiple properties in different locations, which can help to diversify their portfolio and reduce the impact of any potential losses.
Fractional real estate investing also offers investors the ability to generate income from their investments. In many cases, fractional real estate investments are made in properties that are intended to be used as vacation rentals. This means that the investor can earn rental income from their fractional share of the property, providing a source of passive income that can help to weather the uncertainty of a recession.
During a recession, real estate is often seen as a safe haven for investors. While the overall economy may be struggling, the real estate market can remain stable or even appreciate, providing a source of stability for investors. Fractional real estate investing allows individuals to take advantage of this stability, even if they do not have the resources to invest in a property outright.
It is also worth noting that real estate has a low correlation to the stock market, meaning that it does not always move in lockstep with the stock market. Also - real estate tends to see less volatility than the stock market. Both of these can be a valuable tool for investors during a recession, as it allows them to diversify their portfolios and reduce the impact of any potential losses in the stock market.
Another benefit of fractional real estate investing is the professional management that is often associated with these types of investments. In many cases, fractional investments are managed by experienced real estate professionals, who can help to identify, acquire, and manage properties that have the potential to generate income and appreciate in value. This can help to remove the day-to-day stress and responsibilities of property management from the investor, allowing them to focus on their other investments and financial goals.
Fractional real estate investing can be a valuable tool for individuals looking to weather the uncertainty of a recession. By spreading risk, providing access to higher-end properties, generating passive income, and benefiting from the stability of the real estate market, fractional investing can help to provide a source of stability and growth during a challenging economic environment.
Whether you are a seasoned investor or just starting out, fractional real estate investing is worth considering as a way to diversify your portfolio and achieve your financial goals.