Yossakorn Kaewwannarat / iStock.comThere’s been a lot of concern about the economy lately, particularly regarding inflation, rising interest rates, layoffs, a potential recession — and the housing market. The housing crash of 2008 left many families underwater in their mortgages, leading to a wave of foreclosures and people unable to move until housing prices appreciated or they built up enough equity to sell.See: 3 Things You Must Do When Your Savings Reach $50,000Steps To Capitalize on a Housing Market CrashIf you’re looking to capitalize on a potential housing crash, begin preparations early, as good property buys may be just around the corner. Here are a few tips for enhancing an investment property portfolio or starting one from scratch.1. Build Up Cash ReservesInvestors seeking to buy up a few properties once prices drop should start maximizing their savings now. Curtail any frivolous spending and redirect it to a savings account. The more cash available, the better. While home prices may fall, the cost of a mortgage will increase due to current higher interest rates — the more you have for a down payment, the less you’ll ultimately pay in interest.If you can, you’ll also want to avoid purchasing a new property by taking on debt. Instead, you should look for suitable investments you can afford in cash.2. Avoid Taking on DebtForego taking on debt that will eat into your monthly cash flow during the savings period. Rather than buying a new car or using your credit card for a vacation, keep the focus on savings.If you’re concerned about cash flow right now, you might consider taking on an extra job. The more money saved toward your future property purchase, the better.3. Eliminate Existing DebtInvestors should take a holistic look at their personal finances. If you’re currently making large debt payments toward unnecessary items, like an automobile or a large house, consider getting out from under it.It’s possible to sell high-priced, financed automobiles and buy a cheaper used vehicle in cash. Living in dense areas might mean that you can even rely solely on public transportation for a while.Think creatively about personal finances — there may be solutions to consolidate debt payments and put more money toward the ultimate goal of an investment property.4. Research Areas To Buy an Investment PropertyHousing prices haven’t crashed yet, and there is still time to maximize research efforts on investment properties. Look for houses in traditionally low-priced areas, such as the Midwest. Some of the cheapest states to buy in include Indiana, Illinois, Ohio, Michigan and Iowa.Occupancy RateThe area of an investment property should have a high occupancy rate, ensuring tenants will be willing to rent the property. If there are lots of available properties in a location, it may be a sign there are not enough renters to fill them or that there isn’t much demand for housing in the area.Budget for RenovationSome properties may need rehabilitation before they’re livable, especially if you purchase at a bargain price. Including some room in your budget for repairs and upkeep is critical. Keeping the property current can make renting more manageable and increase the rental amount from potential tenants.5. Consider Setting up a Business EntityInvestment property owners will want to set up a business to protect their assets and take advantage of tax incentives. If you’re clueless about the appropriate structure for your business, seek advice from a competent lawyer experienced in forming companies for investment property owners. An attorney can point you in the right direction or even handle legal affairs on your behalf.If you don’t plan on handling property management alone, you should shop around for professionals who understand how the process works. A property manager can oversee the rental process and ensure the property gets the attention it deserves.Final TakeWill there be a housing market crash in 2023? It’s possible, especially if interest rates continue to rise and home inventory levels increase. A housing price correction may be bad news for homeowners, but it’s an excellent time for investors to find some property bargains that can build up passive income streams.If you’re considering buying an investment home during the recession, get your finances in order now. You’ll want to be ready to hop on potential investments before competitors do.FAQHere are some questions people commonly ask concerning real estate investing.This article originally appeared on GOBankingRates.com: How To Prepare for a Potential Housing Market Crash in 2023
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How To Prepare for a Potential Housing Market Crash in 2023
