Making an investment in the real estate sector has traditionally been considered to be a relatively safe financial move during periods of economic recessions. However, the ongoing pandemic situation is admittedly unprecedented and its effects on all aspects of the global economy are still to be seen. Accordingly, prior to making any significant investment decisions, you need to implement the same precautionary measures as you would when investing in stocks.
Specifically, you have to do your homework and research the market trends and projections to determine whether you have a high probability of realizing a return on your investment. Further, in the current environment you also need to look into the flow of foreign investments into the domestic marketplace. As global money transactions are becoming more easily accessible, overseas real estate investors are increasingly becoming a key player in real estate.
In any time of economic turbulence, the real estate market goes through a contraction—and the current COVID-19 situation is no exception to this rule of thumb. Still, the present market data indicates some substantial deviations from how it should behave in a typical period of recession—which is great news for eager real estate investors looking to expand their portfolios.
Do the historically low mortgage rates that are attainable to buyers right now fully counteract the risk associated with purchasing a property amid the uncertainty surrounding the pandemic? There’s an old saying in the real estate investment industry that when times are good you make money on equity, and when times are bad you make money on financing. Currently, several months into the crisis, there is the potential to actually capitalize on both equity and financing. The average property listing prices are holding steady and financing expenses are comparably low, which is an extremely unique situation in the real estate investment space.
Bear in mind, however, that these circumstances will likely not last for long. Potential sellers have been hesitant to conduct any transactions over the health crisis and the subsequent reduced inventory has held prices at their current rates. As government subsidies begin to expire in the near future, and more individuals experience financial stress, there is a real possibility that inventory will increase and prices will drop. Accordingly, savvy real estate investors will see the limited COVID-19 impacted real estate market as a promising potential to capitalize on these rare, yet favorable from an investment perspective, conditions.
When it comes to where is the best place to invest during the pandemic, rural, suburban and vacation localities are experiencing the highest property transaction rates. The condo marketplace has dipped, as people are looking to avoid in close common areas and utilize shared public areas like elevators and lobbies. As an investor, however, you may want to adopt a more long-term perspective when making your acquisition moves right now. With such an increase in real estate activity in rural and suburban areas, any great deals that come along are mainly going to be in the urban centers. It may very well be the case that when the world goes back to normal, you will see a dramatic rebound of equity in these temporarily price-reduced properties.
If you are in the fix and flip industry, keep in mind before making any major moves that the home improvement industry is crowded and in high-demand, meaning both contractors and certain building materials can be hard to get your hands on. Accordingly, renovation timelines may be extended in the near future, and if you have several properties on your books, it may take much longer to complete than you initially planned. Be sure to partner with a hard money lender that you know and trust. Analyze each potential transaction closely before pulling to trigger to ensure that you have a sufficient financial cushion to weather any unanticipated delays.
Alpha Funding Partners offers the best combination of rates and leverage. As a hard money lender, we understand the importance of partnering with each real estate investor that we work with. Not only do we provide quick access to capital, we are upfront and transparent about our fees and what you get when you work with Alpha. We are a New York and New Jersey based hard money lender that strives to build long lasting relationships with each real estate investor that we work with. Interested in having Alpha fund your next loan? Reach out today because real estate investing is always a good idea!