5 Ways Real Estate Investors Can Prepare for a Market Crash | Think Realty | A Real Estate of Mind

Abstract

If you don't think you can stockpile enough cash on short notice, a line of credit on your home or on an investment property is a good way to get quick access to cash. So if you have investment properties that are generating healthy returns right now, it's very possible that cash flow might become sporadic or even dry up once the economy stalls. Tighten Your Portfolio Every investor has some surprises in their portfolio, whether it's a seemingly great property that's barely profitable, or an average-seeming property that's appreciated wildly. You want to get your portfolio down to the solid, high-value, profitable properties in markets that can weather some economic adversity, and have steady cash flow. As long as you have positive cash flow on a property - i.e. it brings in more than it costs to own it - a drop in property value isn't that serious. That's why you should consider using a 1031 exchange to sell your property and reinvest - without having to pay any capital gains - into another, better property. If you do this, you'll be killing two birds with one stone: deferring capital gains, and essentially trading in one investment property for a different one that's better qualified to weather a market downturn.