Although we’re entering the second stage of the COVID-19 reopening, concerns of a 2nd wave are looming over many. Real estate is, undoubtedly, one of the industries that have felt the pandemic’s effects. Social distancing has greatly changed the way people live and interact both in their homes and businesses. 

As concerns of a 2nd wave grow, changes in the investment behavior are becoming more transformative and lasting. As the U.S. housing market is seeing some recovery from the pandemic, with both supply & demand and price stabilization, here is what every real estate investor should know about navigating these unprecedented times.

Recovery curve

Although every crisis that affected the worldwide economy and its following recoveries are different, there are still a few basic elements to watch out for, most-notably the recovery curve. By thinking about what the recovery is going to look like, real estate investors can gauge the possible flattening of the curve and a return to some semblance of normalcy.  

Carefully look at where the unemployment is, where the interest rates are, where the actual occupational demand is coming from, and how that weighs against the existing supply. By focusing on these areas,  investors will be able to get a pretty accurate picture of the recovery curve. They’ll understand how much real estate is in fact available out there and what the demand could look like as they start to recover through the downturn. 

Capital deployment

Another aspect real estate investors need to take into account is the short-, medium- and long-term priorities for capital development. You should be asking yourself what are your priorities, if you consider yourself a long-term investor looking for long-term yield, or if you’re searching for opportunities where you’ll be driving upside and moving on repositioned assets to other long-term investors. 

This one is super important because you must carefully look at your hold period, especially since you’re investing during a recession. Generally speaking, it’s good to be prepared to hold listings a bit longer because no one knows exactly how long the recovery curve is going to be.

Sector sensitivity

As real estate investors, we know that a property’s value is sensitive to the changes in the economy. The outlook differs between sectors and varies based on:

  • Cushion offered by the in-place leases
  • Market rents (e.g. apartment rents are less volatile than office rents)
  • Operating leverage (e.g. senior and lodging housing have lower margins).

This can be a good time for house flipping

Currently, the interest rates are pretty low, which means that it can be a good time to buy flip properties. The explanation is that low-interest rates make houses a bit more affordable, thus you can purchase a house, fix it and wait until the prices go back up in order to flip it. 

Commercial real estate opportunities

Some businesses will inevitably shut down, decide to continue running remotely, or relocate. This means that there will be high-quality commercial real estate assets available. The critical steps are choosing the right asset and finding a trustworthy private lender to finance the investment. Keep your eyes open and use this time to plan, train, and read. Network with real estate pros – social distancing is physical, not personal, so you can easily network online. 

This isn’t the first time the industry has been impacted by a downturn and it probably won’t be the last time either. Be prepared, do your due diligence, and carefully protect your investment – it’s a smart strategy for having the biggest payoff in the end.

 

Also Check Out: Getting Started in Rental Investments

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