How to protect your property portfolio amid fears of a recession

With fears of a downturn continuing to lurk in the wings, many investment strategists are advising their clients to recession-proof their portfolios, ready for anything.

In increasingly uncertain times, the best way to build resilience is by buying well in the first place, says Glen James, a former financial advisor turned podcaster and co-author of The Quick-Start Guide to Your First Property.

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“You want to invest in quality assets to hold for eight to 10 years, recognising that there will be periods of low growth in there,” he says. “There are defensive assets too, like less specialised buys, majority owner-occupier established suburbs rather than investor-heavy greenfield sites, and more blue-chip inner city.

“It can also be a good idea to buy dual-occupancy property for more income; property that can be improved by, say, adding a granny flat or superficial improvements. Or even lower your risk profile with Defence Housing that gives a guaranteed tenant for 10 years.”

As a possible recession approaches, James says it’s also critical to maintain a strong cash buffer to weather the storm and carry you through periods of rental vacancies or, with a new tenant, lower rent.

Yet, come a slump, Buyers Agency Australia property educator Amanda Calabria says there’s one asset you need to preserve above all others: your sleep at night.

“For that, it’s important you start planning before any recession comes along,” she says. “Preserving your borrowing capacity by collecting positive-cash-flow properties, as well as negatively geared, is a good idea, as well as keeping cash in an offset account.

“You should also be running regular portfolio reviews and checking rents are at market prices, seeing how your properties can be improved to get a higher yield.”

Calabria also suggests calling your broker to ask for a better interest rate on borrowings, as even a tiny cut could be significant over multiple properties.

In areas where co-living is available, another tactic is to rent out rooms rather than whole houses to increase income.

Diversification is an essential tactic for protecting portfolios in precarious times, says Anthony Ursino, chief operating officer and general counsel at private equity real estate platform Pro-invest Group.

As well as traditional residential and shares, he recommends also looking at other kinds of assets.

“One of the things we are focusing on is the build-to-rent space and flexible living,” Ursino says. “Flexible living is both short and long-term stays, and we’re seeing a lot more singles and couples now choosing this kind of accommodation rather than buying their own homes because of unaffordability.

“These aren’t just rooms; they’re places with a real sense of community and, through communal facilities and things like run clubs, offer plenty of opportunities to interact with other people.”

The group has itself just invested a reported near-$100 million in buying the Coogee Sands Hotel & Apartments in Sydney, and is adapting it, with 80 self-contained studios and one-bedroom apartments, into a flexible-living building.

“To make investment portfolios recession-proof,” Ursino says, “we all have to look for a little bit more depth within investments and at what trends will be there into the future.”