Recession-Proof Real Estate
In a world of volatility and fly-by-night schemes, recession-proof businesses are gaining momentum and appeal. One thing most people don’t usually mention is recession-proof real estate, yet that’s exactly what we’re building here at Wollaston Real Estate Investments.
Affordable and C-Class real estate offers landlords an opportunity to secure subsidized income, reducing exposure to risk. Through housing authority voucher programs, eligible tenants are only responsible for a fraction of the market rent. As all entrepreneurs know, a lack of cash flow can hurt you faster than an unprofitable year. Leasing a building exclusively to voucher holders can automate your income stream as long as you maintain the property, with housing authorities typically covering 50-85% of an eligible tenant’s rent.
For landlords with a tenant base consisting of voucher holders, there is usually only upside. Rents often increase each year, and if a tenant’s income decreases, their subsidy assistance increases. Many high-end landlords still chase rent every month, but chasing only 30% of the rent sounds better to me.
Real estate expenses typically range between 25-50% of a building's gross income. These expense ratios vary widely depending on factors like housing quality, utility expenses, taxes, management, and legal fees. Voucher holders provide peace of mind, as basic expenses are paid on time, every month.
The old adage goes, “Money is made in the buy, not the sale.” C-Class communities often have more distressed properties, where a willingness to take on a challenged property can mean a much lower acquisition cost per unit compared to more established neighborhoods.
In East Boston, Massachusetts, apartments routinely trade above $400,000 per unit with achievable rents around $3,500 per month. In western Massachusetts, you can acquire and renovate an apartment for under $100,000, with monthly rents between $1,250 and $1,850.
Accounting only for the guaranteed housing voucher portion, western Massachusetts properties will earn more monthly revenue, pound for pound, than East Boston apartments. This multiplier effect led us to shift operations to select markets just 90 minutes west of Boston.
Here, you can outperform other real estate markets from a cash flow perspective while substantially reducing risk and exposure by investing in C-Class real estate.
If you're interested in learning how you can participate in a recession-proof business model, schedule a discovery call with our team.
