Real Estate Investing: Navigating The Impact Of Mass Unemployment
Current trends suggest that we could be seeing mass unemployment in the very near future. How do you successfully navigate that as a real estate investor?
Bracing For Mass Unemployment
Whether it is inflation or unemployment data, the official numbers that get published not only lag by months, but seem to seriously understate the situation. Don’t be surprised if real unemployment turns out to be dramatically higher by the end of the year.
On top of current monetary policy, and recent mass layoffs at big tech companies and corporations, AI and automation technology is putting people out of work far faster than you might think.
Consider that around 10% of the population is employed in the customer service sector according to the Bureau of Labor Statistics. Given that only around 60% of the population is actually engaged in the workforce, or looking for work, that’s close to 20% of workers that could quickly be displaced by technology in the next few months and years. That’s just one sector.
This time around there is no running to line up to work at Walmart or the Dollar Store. Those jobs have already been taken by technology.
These jobs are not coming back either.
Contrast this to the Great Recession, which saw just 9.9% seeking unemployment benefits.
Real Estate Investing During High Unemployment
If we do see a substantial uptick in unemployment, which may last longer than most are used to seeing, how do you manage that as a real estate investor?
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The obvious impacts of rising and higher unemployment include:
At NNG Capital we were already getting ahead of this curve by minimizing exposure to, and selecting the best mortgage loan notes. We also have a focus on serving those who will be in the most need during a period like this, including affordable rentals and housing for seniors. In terms of flips, we’ve focused on higher end markets where affluent cash buyers still see property prices as being deals and can afford to pay cash. Like in NJ.
In addition to focusing on resilient housing, succeeding in these times also means diversification. This includes the tenants you have. You don’t want all of your cash flow reliant on one employer, or one industry. It’s worth asking what tenants will be able to pay the rent without a job? It could be retirees on fixed incomes, other real estate investors with passive income, or those who are willing to pay an entire six or 10 month lease in advance.
Then be sure that you are providing the best human service to your buyers, renters, and borrowers, and building strong relationships with them.
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