With economists predicting that the next recession will begin in 2020/2021, savvy agents are re-thinking their business models, learning how to recession-proof their real estate operations so they’ll be able to thrive under the new market conditions.
And that’s what we’re covering today. What exactly does it mean to recession-proof your real estate operations? And how exactly should you do it? What changes do you need to make to your business operations to be successful in the changing market?
By the way, if you’re interested specifically in recession-proofing your finances, marketing, prospecting, or scripts, make sure you check out these recent posts:
- 7 Real Estate Marketing Ideas for Slow Markets
- How to Recession-Proof Your Real Estate Business Expenses
- Real Estate Scripts to Help You Win Clients in a Slow Market
- Real Estate Prospecting Ideas for Slow Markets
This post is specifically dealing with your day-to-day operations.
So let’s get to it, shall we?
How to Recession-Proof Your Real Estate Operations
Adjust Your Daily Schedule
During a hot market, you’re probably spending an hour a day prospecting, another hour replying to emails, voicemails, and messages, some time following up on pending transactions and servicing listings, and most of your time and effort goes to your client time: listing appointments and showings.
In a recession, you will likely have fewer clients. So you’ll be able to reallocate your time to better serve the clients you do have. And to drum up new business.
Expect to double your prospecting time during the recession. In addition to following up with your sphere, contacting expired listings, reaching out to buyers, etc, you’ll want to invest some time in longer-term marketing strategies like blogging and social media.
And your new recession-proof income stream will require a little maintenance time as well…
Build a New Income Stream into Your Operations
We talk a lot about diversifying income around here. Because it’s tough to be 100% dependent on your commission checks as your only source of income. Especially during a recession! Building a new income stream is one of the best ways to recession-proof your real estate operations.
When you can find an income stream that
- provides value to your real estate clients,
- helps you promote yourself as a real estate expert,
- builds relationships with future buyers and sellers,
- and offers greater opportunity during a slow market than during a strong one…
…you’re golden!
Here are a few ideal options that meet all the above criteria:
1. Property Management
Property management is a great example. When the housing market dips, the rental market often picks up. This is a great opportunity to expand your business services in a way that makes sense for your clients. Maybe you have a homeowner who doesn’t want to sell while the market’s down, but they need to relocate. Help them rent out their home!
You might just help them advertise, screen prospective tenants, and handle the paperwork for a flat fee (usually about 50% of the first month’s rent). Or you could be a property manager for them. Collect rent, handle maintenance requests, lease renewals, etc on an on-going basis. You can usually earn 10-15% of each month’s rent as your fee.
2. Property Tax Appeals
Property tax appeals are my favorite recession-proof income stream for real estate professionals because 1) they’re fairly quick and easy, 2) they are a serious help to your clients (past, present, and future), 3) you already have 90% of the knowledge and skill you need to practice property tax appeals, and 4) no one else is offering this service because most people don’t even know that property tax appeals are an industry!
Here’s how it works: Homeowners are taxed on the assessed value of their homes, which is typically just an estimate calculated by a formula at your County Assessor’s Office. During a recession, this amount is quite often too high because the Assessor didn’t take the housing market dip into account. All you have to do is show the County that their value is too high. Then your clients get lower property taxes, and they pay you a percentage of their tax savings.
All you usually have to do is file an appeal application, complete a CMA, and explain your CMA to the Assessor (sometimes by phone, sometimes in a formal hearing setting). And you look like a real estate hero when you save your clients money!
PS: if you’re struggling with your differentiator in your branding, this is a killer differentiator. Add complimentary property tax reviews for all your clients. It takes only a few minutes per year to review the values for appeal opportunity, but you’ll be known as the agent who cares about your clients’ financial well-being long after the sale closes.
3. Credit Repair
Do you struggle to find qualified buyers? It’s a common problem in a down market when lenders tighten up their lending requirements.
So help your buyers improve their credit! It’s fairly easy, doesn’t take much time, gives you an immediate paycheck for credit repair services, and you’ll also end up with the buyer’s agent commission when your buyers qualify!
Whichever recession-proof income stream you choose, commit to spending an hour per day on marketing and performing your new services. Or hire someone to handle the marketing and administration for you so you can focus on the client-facing aspects of your business.
Insist on Pre-Approvals and Educate Your Buyers on Credit
It’s more difficult for buyers to qualify for a home loan during a recession, so you need to know how much they qualify for before you invest your valuable time in showing them properties. Of course this is also a service to your buyers. They want to make sure they can acquire financing before falling in love with a home.
Also, invest a little time upfront in educating your buyers on the topic of credit. Explain the importance of a good credit score to a home loan. And give your buyers a list of actions to avoid during their search so they don’t accidentally invalidate their pre-approval.
Add REAL Value for Sellers
If you want to land listings during the recession, you’ll need to up your listing game.
Yes, you’re a good negotiator. Yes, you’re going to market the property well. Yes, you have buyer contacts you can bring to the table. Every agent in your market can say the same!
It’s time to do something other agents aren’t doing: offering REAL value.
Example: Help your sellers stage their home. In a strong market, staging gets a higher price; in a weak market, staging gets the home sold. Work out a deal with a professional stager where they get a percentage of your commission (instead of an upfront fee) in exchange for their services. It doesn’t even have to be the whole house. Strategic staging in high traffic areas can make all the difference!
Or how about investing in professional listing photos for your sellers. If you don’t already have a professional photographer in your pocket, get one! You don’t want potential buyers to eliminate your listing from contention because of some poor lighting or jenky angles. And your listing presentation is going to transform when you explain to buyers that you pay for professional photos on their behalf.
Get Your Complete Recession-Proof Guide!
If you’re serious about growing your real estate business during a slow market, check out The Recession-Proof Real Estate Agent. This book offers a complete step-by-step guide to recession-proofing your real estate business.
