Is a Recession Looming in 2024? Hedging through Real Estate Investing with DLP Capital

January 19, 2024 at 09:15 AM EST

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By Austin DeNoce, Benzinga

As we march forward into 2024, the whispers of a potential recession continue to fester, echoing the financial challenges many Americans faced in 2023. Despite some positive signs in the economy, such as GDP growth and favorable unemployment data, the specter of a downturn looms, fueled by factors like the long and variable impact of the Federal Reserve's aggressive interest rate hikes and a globally interconnected economy showing signs of strain.

Europe, China and much of the developed world have effectively already fallen into a recession or are likely to do so, and experts predict a slowing of the global economy in 2024, so preparing for a potential downturn isn’t unreasonable. Looking specifically at the U.S., many experts including JPMorgan (NYSE: JPM), PIMCO, and Deutsche Bank (NYSE: DB) have shared their concerns of at least a mild recession, with TD Securities noting, ”We put the odds of a U.S. recession at around 65%," citing interest rate effects, risk of government shutdown and a weaker labor market as the causes. With that uncertainty in mind, there are some resilient investments that may often be capable of weathering recessions better than others. One such asset is real estate – especially rental housing which is increasingly in demand in America.

Why Real Estate Often Stands Strong During Recessions

Real estate has historically demonstrated a remarkable ability to weather economic storms, particularly recessions. This stability stems from the intrinsic value of real property and its less direct correlation with market whims and investor sentiment shifts, which often plague the stock market during economic turmoil. When economies struggle, tangible assets like real estate can become a safe haven for investors seeking stability and more predictable cash flows.

However, it's not just about stability. Real estate can also be a source of growth during downturns. While other investments may plummet in value real estate, such as multifamily properties or single-family rental communities, can hold their value and in some cases appreciate. This resilience can be attributed to several factors. First, real estate has an immutable role as a basic necessity. Everyone needs a place to live and keeps using real estate (their apartment, rental home, etc.) regardless of broader economic conditions. A family budget may get cut, but rent would usually be one of the last things to go. The demand for rental homes has especially been skyrocketing as the high cost of homeownership is increasingly unattainable for so many Americans. Second, real estate is used as a hedge against inflation. Because it’s a real, tangible asset, monetary debasement doesn’t impact its real value; it actually increases its nominal value, protecting wealth. Finally, rental income can provide steady investment cash flow.

Harnessing The Power Of Real Estate With DLP Capital

Enter DLP Capital, an organization harnessing the power of real estate to offer investors stable yet lucrative investment opportunities. With a range of funds like the DLP Preferred Credit Fund, DLP Building Communities Fund, DLP Lending Fund, and DLP Housing Fund, the firm targets annual net returns between 9% and 13%. However, its funds focus on much more than financial returns; they're about creating and preserving affordable workforce rental housing, a mission that serves a dual purpose of providing above-market returns for investors while addressing a critical societal need.

DLP's funds are structured to capitalize on the strengths of real estate as an investment class. For instance, the Lending Fund focuses on first-position loans to seasoned real estate operators, such as multifamily owners, leveraging the security of real estate collateral. The Housing Fund and Building Communities Fund each take a more direct approach, investing in multifamily rental communities and new development projects, respectively. This diversification across different aspects of real estate not only spreads risk but can also provide resilience in downturns.

A Path to Financial Stability and Growth

In the face of a potential 2024 recession, DLP Capital's real estate-backed funds present potentially compelling strategic investments for investors. Its funds offer a direct path to surviving economic uncertainty with tried and true safe-haven assets but also provide opportunities for meaningful gains with target returns in the double digits. Nobody knows where the economy is headed, but the resilience of real estate investments can strike a great balance between asset protection and growth, regardless of economic fluctuations.

For more on DLP and how investors can get involved, click here.

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