COVID-19 has impacted nearly every part of the economy and that includes real estate. However, the pandemic hasn’t affected every sector of the real estate market evenly. While certain types of properties are depreciating, others are more in demand than ever before. This can make it an especially confusing time for real estate investors.
Real estate professional Jonathan Weiss of Greenwich, CT, delves into the different types of properties worth investing in and provides a few key tips for real estate investing amidst the pandemic.
City Versus Rural/Suburban Properties
One way that COVID-19 has impacted real estate investing is in regards to the types of areas that are most in-demand. In the past, all types of residential properties were booming in urban centers. However, due to the pandemic, many people who are now working remotely are looking to leave their small, confined homes in the city, in search of more space and a lower population density. As a result, Jonny Weiss says that the greatest amount of activity is happening in rural and suburban areas right now. In cities, short-term rental properties, hospitality assets, and condos alike are dropping in value or sitting vacant. This is leading to a higher degree of inventory in urban markets.
The bottom line is that living near a downtown core has temporarily lost its appeal, now that working from home is more conventional and residential tenants can no longer enjoy the urban amenities that typically justify premium rental rates. As a real estate investor, it isn’t always the best idea to chase trends. When it comes to the latest trend of higher activity in suburban and rural areas and lower activity in urban centers, he says that rather than going where the competition is fierce, it might be wise to think more contrarian and take advantage of the discounts that are already starting to pop up in urban cities. Generally speaking, as long as you plan on making a long-term investment and aren’t looking to make cash quick, investing in well-located, city center assets at a discount to pre-covid values may be a better long-term bet than buying in suburban or rural areas.
Vacation properties represent one sector of the real estate market that is booming. With severe travel restrictions in place, people are left to face the reality that they might not be able to go on a vacation abroad for some time. The result has been a drastic increase in local vacation properties being bought stateside. Many people who were on the fence about investing in a beach house or lakeside cottage have now decided to take the plunge, knowing they likely won’t be getting on a plane anytime soon. Jonny Weiss predicts that this renewed interest in vacation properties is only going to grow, so if you’re thinking of investing, now is the time, as this niche is only going to become more lucrative as the pandemic goes on.
Real Estate Investment Trusts
If you’re new to the world of real estate or do not have the time or manpower to buy physical assets, then investing in real estate investment trusts (REITs) is a different way to invest in income-producing real estate. REIT stocks can be bought on an exchange and provide liquidity for investors, meaning their money is not tied up in specific real estate property, and shares can be bought and sold daily. According to Jonathan Weiss of Greenwich, CT, REITs have been holding steady throughout the pandemic. Thus, they provide an alternative option for anyone hesitant to buy real estate during this uncertain time. With REITs, you don’t have any of the stress or responsibility of managing a physical property, but you still get to reap the benefits of investing in real estate, such as dividend income, inflation protection, and long-term capital appreciation.
The Bottom Line, According to Jonathan Weiss
Overall, since the real estate industry tends to lag behind other economic sectors, it is still too early to ascertain the full impact that Covid-19 will have on real estate in the medium term, especially sectors that were on the decline before the pandemic, such as retail. However, several well respected real estate professionals have argued that COVID-19 has had a positive impact on the market, from a real estate investor’s perspective. Distress is beginning to rear its ugly head, house prices are now steady and rising in some markets and financing costs remain at historic lows. To most investors, this is an optimal set of circumstances. That said, things can change, especially when we’re amid a global pandemic. So, if you’re going to invest in real estate right now, you need to be smart about it.
Weiss’ first piece of advice is not to take on too much. It’s easy to get excited about the market right now, but Weiss says, as a novel investor, that you should still only take on one investment at a time. Acquire one single property, ensure it’s fully operational, and has stable cash flow coming in before you start to think about a second property. Part of this is because the market is changing quickly, but the other part is that the home improvement industry is booming, which means if you plan on making any changes to the property, it could take longer than usual to engage a contractor and complete the work. With renovation timelines being longer than ever, you don’t want to risk having multiple properties that are behind schedule and likely over-budget.
Further, real estate professional Jonathan Weiss of Greenwich, CT, claims that if you’re thinking about getting into real estate investing to make money quick, then think again. Real estate is never a get rich quick scheme and that rings especially true amidst the COVID-19 pandemic. With any property you invest in, you should always be thinking in the long-term to fully capitalize on the opportunity.
Finally, if you’re thinking of investing in real estate right now, it’s a good idea to consult an expert. Now more than ever, having the advice and guidance of an industry professional is a necessity. Professionals know all there is to know about the real estate market and are in the best position to advise you on which properties make the smartest investments at any given time or market location, in both the short and long-term.