The COVID-19 pandemic has had an unusual effect on the real estate market. Some locations are thriving while others are crashing, creating a unique opportunity for real estate investors.
Location has always played an essential role in real estate, and that's truer than ever in the post COVID-19 world. Here are some considerations to keep in mind when trying to determine where to invest after COVID-19.
Looking Outside the Cities
While the media have largely overstated the idea of a mass exodus from urban centers, there has been a shift away from city life. A few factors are coming into play with this migration. First and foremost, people are off work and financially unable to maintain their high cost of living in the city. Additionally, many people are taking this as an opportunity to step away from the hot spots that they call home.
Many families who have been relegated to life at home are realizing that they could use more space to roam. Finally, as remote work becomes the new normal, people realize they can work from anywhere and take off to new places.
So, what does this all mean for real estate investors?
There's an opportunity outside of the cities for more rental or flip properties. Investors should start looking on the outskirts when considering an investment property to take advantage of this lifestyle shift.
However, established real estate investors with more capital at their disposal have another opportunity within the cities. As more people leave, more properties will become available. This shift isn't expected to last for more than a couple of years. Within a few months, many property owners will be looking to unload their city homes and rental suites. Savvy investors can sweep in and collect these properties for a longer-term investment strategy.
Seeking Hot Markets
Surprisingly, many ideal locations are currently in a sellers' market. However, that's expected to shift within the next few months. With many government support programs coming to a close and some regions going back into lockdown, many property owners who were able to withstand the first wave will be motivated to sell. According to Houzeo, many of these property owners will be handling the sale themselves, creating an opportunity for skilled real estate investors to negotiate.
Real estate investors should be on the lookout for locations that are shifting into a buyers' market. Timing is everything when implementing this strategy. Take some time to do thorough research on the location to determine whether the market will bounce back in a few years or if the decline is expected to continue.
Investing in Long-Term Rentals
Investing in long-term rentals in a post-pandemic world has the potential to be incredibly profitable. Look for long-term rental opportunities in locations where the housing market is declining. As mentioned previously, many people will be motivated to sell their homes to avoid a tricky financial situation. For them, shifting to a long-term rental is an intuitive decision.
Another tick in the long-term rental column is that banks and brokers are tightening their mortgage qualification requirements to recover from the pandemic. It's now more challenging than ever to qualify for financing. As many aspiring homeowners won't be able to secure funding for some time, they'll be looking for an alternative.
When capitalizing on the long-term rental strategy in a post-Coronavirus world, look to the outskirts of the cities and suburbs.
Investing in Short-Term Rentals
The events of 2020 have many real estate investors wondering whether short-term rentals are still a viable investment strategy. Needless to say, paying higher prices for a short-term rental in a tourist hotspot like New York or Orlando isn't a smart move.
However, many people are embracing the idea of a "staycation" within scenic areas of their state. The staycation era could present a viable short-term rental opportunity for more remote destinations with picturesque surroundings.
Looking Outside Your Usual Radius
One of the core components of creating a real estate investment strategy is identifying where you'll cast your net. Keeping a centralized investment area can help streamline your process and boost your local expertise.
Consider switching it up in the post-pandemic world and casting a larger net. Go where the money is, whether that's a hot buyers' market or a city with a high price-to-rent ratio.
In other words, learn to adapt and evolve with the world around you. That's the key to success in these unprecedented times.