November 23, 2024

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Motley Fool Issues Rare “All In” Buy Alert
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Bear markets, which are marked by a drop in values of 20% or more, can happen in the real estate or stock market, temporarily crushing prices. While they are no fun to endure if you’re actively invested, they can be a tremendous time to load up on new real estate investments since prices are down.
As a newbie investor in the last major bear market (the Great Recession), I failed to make important investment moves, and I’ve regretted that terribly.
We’re not in a bear market as of yet, but market volatility and downward-trending real estate values have investors worried one could be on the horizon. To avoid being wracked with regret from failing to act, here are three real estate moves you should make when the next bear market comes around. 
Image source: Getty Images.
Rental property can be an incredible long-term investment, one that provides reliable passive income and growth as real estate values increase. Recent real estate values are nearing record levels and have made the last few years a challenging time to buy rental property on the cheap.
Buying property at a lower price increases the chance of a greater return on investment (ROI), increases cash flow, and leaves more wiggle room for rental rate fluctuations, vacancies, or increased expenses over time. A real estate bear market should be a shopping spree.
Just keep in mind that lending often tightens during bear markets, making it more difficult to borrow money to purchase a rental property. So it’s important to have some liquidity to help you take advantage of these market opportunities.
Real estate investment trusts (REITs) were created to help everyday investors have access to institutional-quality assets like multifamily housing, self-storage facilities, retail shopping centers, office buildings, and countless others that are often out of reach. With over 200 publicly traded REITs to choose from, they are a fantastic way for investors to gain broader exposure to the real estate market without having to own or manage physical property — at a fraction of the price.
Many REITs are in bear territory, down 20% to 40% or more from recent highs despite the broader market remaining in correction territory. This means right now is the perfect opportunity to load up on these dividend-paying investments.
Plus, dividend yields increase when share prices are down. So by purchasing shares now while prices are lower, you’re increasing your yield today and in the future, thanks to the power of dividend increases over time. 
REITs and rental properties aren’t the only way to invest in a bear market. High-growth real estate stocks, often tied heavily to the real estate brokerage or tech industry, can be another avenue for gaining real estate exposure and taking advantage of favorable pricing.
Industry innovators and disrupters like Opendoor, Zillow, WeWork, Airbnb, or eXp World Holdings have promising growth prospects for the long haul. While there’s always a chance these investments won’t pay off as hoped, buying shares near rock-bottom prices undoubtedly increases your chances for an incredible return if it takes off.
Real estate bear markets don’t last forever; prices eventually rebound and often surpass pre-bear market highs. If you don’t take advantage, the opportunity will pass you by.

Liz Brumer-Smith has positions in Airbnb, Inc. The Motley Fool has positions in and recommends Airbnb, Inc., Opendoor Technologies Inc., Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Market-beating stocks from our award-winning analyst team.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/25/2022.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.

Market data powered by Xignite.

source

About Author