Is Recession the "R" Word?

Could the New Year bring tidings of ill will? Dolf DeRoos, author and real estate expert, doesn't think so. He believes this is an excellent time for "investors and not speculators" to start looking for properties that can provide positive cash flows and long term appreciation.

My question to him during a radio interview was, "Housing starts for November are at their lowest levels since the early '90s when we were experiencing a similar decline in home values and what economist described as a mild recession. Is this a repeat?" There I put it out there for all to hear, "RECESSION."

Dolf replied, "Yes, I believe we are in a similar situation to the early 90's when valuations were too high and the market had to go through a correction. Since then, however, home values increased threefold and I believe we will see the same type of appreciation over the intermediate to longer term." In other words, opportunities can be found in this economic chaos.

Rental properties will benefit in this soft economy. The one bright spot in the November housing stats was that multifamily unit construction actually increased. Unfortunately most of the folks who are overextended on their mortgages will need to downsize and opt to rent until they can find solid financial footing. Dolf suggests investing in affordable rental properties as an area of opportunity.

Multifamily units or apartment dwellings would also meet the criteria for affordable living spaces. But investors are warned to proceed with caution. "Apartment renters are younger and more transient. You must have a consistent high occupancy to cover total carrying costs," Dolf cautions. Remember, financing for rental properties requires a larger percentage of equity than a personal residence

A recession can be defined as two consecutive quarters of a falling GDP or economic activity. Are we entering a recession? Doesn't matter as long as you tighten your belt and understand that wealth is built one day at a time.