One of the big topics of conversation among multifamily investors around the world right now is what shape is the next economic recession take? Is it going to be a w-shaped recession, a u-shaped recession, or something else?
In this article, I will break down the next recession and provide you with some insight into what possible shape the recession could take, how long it could last, and most importantly how it’s going to affect the multifamily industry in the years to come.
V-Shaped Economic Recession
The v-shaped procession is by far one of the very best scenarios that most economic analysts are hoping for.
We’ve had other v-shaped recessions in the past. When this type of recession occurs, it typically starts with the economy falling sharply then once the economy hits bottom it begins to shoot right back up in the form of a v shape.
Are we going to have a v-shaped recession? Although hopes are high, for people who are interested earning passive income through real estate, that this will be the case, it’s unlikely that the next recession will take a v shape. Why? With more than 30 million people unemployed in the United States, and counting, it stands to reason that the economy is not going to quickly “bounce back” where it was before Coronavirus hit.
When was the last v-shaped recession? It happened back in 1953 when the blooming post WW2 economy was slowed down by high-interest rates. That recession lasted for about 1 year but the good news is that the United States economy quickly recovered and was back on track following a steep decline.
The next shape that the next recession in the United States could take is a u shape. What could this recession look like? It’s very similar to a V-shaped recession, the only difference is that with the u-shaped recession it will last over several consecutive quarters in a row before the economy recovers.
When was the last time that our country had a U-shaped recession? For example, we will have to look back to the mid-1970’s when that recession lasted from 1973-1975.
With a w-shaped recession, this economic recession is going to resemble a v-shaped recession since most economists will be thinking that the economy is headed for a quick bounce back but instead of staying in a period of recovery following the recession, the economy sinks once again for a double-dip recession.
If you’re interested in earning passive income through real estate, you may be old enough to remember the last w shaped recession that the United States economy went through. That recession lasted from 1980-1981 before the economy fell back into another recession and then recovered again by the fall of 1982.
One of the worst recessions that any economic analysts could imagine is an L-shaped recession. Why? This type of recession is also known by “depression”.
We have seen depressions in the United States before; the last one began in 1929 with the stock market crash and lasted until 1933.
Sadly, many economic analysts are an agreement that the United States economy is on the verge of another L-shaped recession especially when we consider all the factors that are in play including record unemployment, a shaky stock market, asset bubbles bursting, failed trade talks with China and the “wildcard” that Coronavirus continues to be for the economy.
Even though the United States economy has enjoyed a record period of economic growth over the last 10 years, it’s foolish to think that our economy couldn’t go through another L-shaped recession.
Japan it’s a perfect example of an L-shaped recession since their country has technically been going through one since the 1990’s after experiencing an awesome period of economic growth from 1950-1990.
This Recession Is Going to Be Different
As of May 2020, the next recession hasn’t even started yet and even though many economic analysts who are also experts at owning real estate in an IRA, are hoping for a V-shaped recovery, and an awesome 2021, it’s too soon for anyone to tell what shape the next recession is going to take or when we can expect the economy to recover.
What should you be doing now? If you’re like most multifamily investors, you’re anticipating that this next recession is going to be a lot different than any other that we faced in the past, including that last recession that everyone remembers which started in December 2007 and lasted through June of 2009.
One of the best things that you can be doing right now it’s getting your “economic house” in order. What does this mean? It’s simple, you should be focusing on cutting your expenses right now that you currently have with your existing multifamily properties while also focusing on building your cash reserves at the same time.
Your number one goal has a multifamily investor should be to be able to thrive during the next economic recession while also being able to capitalize on any awesome opportunities that come your way to purchase multi-family properties in 2021 or beyond.
Contact Trier Investments
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