When the first wave of the coronavirus hit, things came to a complete halt in the real estate investing realm. The real estate market graph took a dip, and investors were confused as to whether to continue pumping money into a shaky economy or hold on until things were stable. The real estate market suffered, but not as much as some badly hit industries.
After a while, real estate investments took a turn to the new normal and most investors pivoted as a way of adapting to the drastic changes in the market. For a short while, there was a capital flow pullback because of the uncertainty of the direction of the market. Up to now, post-pandemic investing in real estate is a little different from before the pandemic.
The Effects of COVID-19 On Real Estate Markets
The pandemic has had a significant impact on the real estate markets forcing players to adjust their strategies. Consumer behavior has changed, tenants were more concerned with security in the past, but now they are more than ever concerned with flexibility. The coronavirus has affected the real estate markets differently, and here are a few of those effects experienced.
Declining Individual Foreign Investments
The coronavirus caused travel restrictions which had a negative impact on individual foreign investments which have decreased over time. It has become harder than before to comply with the strict regulations of foreign real estate investing. However, while investing in foreign real estate has become harder, the upside is that some of these markets have become cheaper. This is because the foreign currency values have risen multiple times than the national currencies. Also, there has been an increase in foreign demand.
Increased Demand But Low Supply
Real estate sales really dropped when the pandemic hit but luckily, started picking up in the late spring where towards the end of May, housing search and purchase started increasing. Online and social-distant viewings bolstered the home showings per listing after the pandemic. Unfortunately, the supply of real estate did not pick up the pace, rather remained low. As the new listings continued to increase, inventory was decreasing.
There has been some light on the economy, but as unemployment continues to increase and an unpredictable economy has a negative impact on the housing market.
Heightened Use of Technology in Real Estate
While the pandemic brought tension and left the real estate market a little unsteady, people are still buying property and moving to locations they feel are more comfortable for them: Technology has been enabling most of the activity in real estate. From management to buying and selling of homes, technology has transformed everything during the pandemic. Because of social distancing requirements, buyers are able to view and buy homes from the comfort of their mobile phones while property managers control everything from home/office.
How to Invest in Real Estate Post-Pandemic
The pandemic was an unprecedented event, and the future is unpredictable hence it would be hard for investors to estimate the market outcome. Should things worsen in the future, it is probable for investors to panic and sell at the bottom of the market. The prices might drop, but the best thing is to hold back and wait for them to recover. Having a mixed property portfolio goes a long way, from commercial, residential, land, Reits, etc. Also, when diversifying your property portfolio, it is also important to invest internationally as it reduces the risk of the high impact of recession from one country.
To that end, the following are tips on buying investment property during the pandemic.
Establish Your Investment Goals
Any successful investor first establishes their investment goals before getting into anything. This is one of the things that set them apart from other failed real estate investors. For instance, condo investments are low maintenance and multi-family properties yield more cash flow when compared to single-family homes. When it comes to equity appreciation, single-family homes have a higher potential than multi-family properties.
When talking about your investment goals, having a specific price point is important. You might need a minimum of 20%, sometimes 25% as a down payment, so if you are looking to finance your investment property, this should be your basis for budget planning. And when putting together your budget, interest rates, as well as repair and closing costs, should be included.
Choose a Market With Affordable Prices
It may sound counterintuitive to most if not all beginner investors, but buying real estate in major cities only is a bad investment move. The rental income in major cities, for example, New York is pretty high, but when it comes to the amount of investment capital needed, they are ridiculously expensive. What’s more, the more expensive the property is, the more costs and expenses you will incur to maintain them, which might translate to low ROI.
Housing markets in less-developed cities and towns have experienced the least impact by the pandemic. This makes them some of the best locations to invest in because there is a thinner connection between them and the global economy. As such, small towns have more protection from crises such as the coronavirus pandemic.
Buy From Distressed Sellers
During the COVID-19 period, you might want to look for distressed sellers to buy real estate from. A lot of people are motivated to sell their property as soon as they possibly can because they can no longer afford to keep them. There are more distressed sellers in the market because of the pandemic, these are known as motivated sellers because of the desperation to quickly sell off their property. And because of the desperation, they may be pushed to offer deals lower than the asking price, which is an advantage for you.
Find a Good Real Estate Agent
Buying real estate especially during a pandemic can be a tricky affair. Real estate itself is a little complicated for any novice investor, and since the pandemic has changed a lot of things, it can even be more confusing. Whether it’s questions that you have or simply need advice on what to do before and after investing, a good real estate agent should be able to help you with everything. They will be able to guide you through the dos and don’ts of real estate during this pandemic.
Real Estate Investing Beyond COVID-19
With the pandemic, more people are finding it hard to invest in real estate especially because of bad markets, job losses, and generally, financial hardships. The good thing is that COVID-19 created some pretty good real estate investment opportunities, despite the fact that it had a negative impact on the markets. As long as you are financially stable and can finance your property at low rates, investing in real estate might be a good move.
Disclaimer: This article is a guest submission, written by Mack Dudayev. Mack Dudayev is the co-founder of Chance Realty LLC. After perfecting his business growth strategies in his first company, he decided to turn his sights on the real estate world, using all of his digital marketing tricks to grow his agency.
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