As a savvy real estate investor, you’ve probably been on the search for the right investment property leading into the peak spring and summer real estate buying seasons. Of course, things panned out a little differently this year than expected due to the coronavirus outbreak. Given the immense magnitude of the viruses’ effects globally, this is uncharted territory for all of us. If the uncertainty has you questioning whether or not you should purchase an investment property during the pandemic, Hubzu is here to help. The simple answer is yes — but only under certain circumstances.
As you probably know by now, purchasing real estate can be an involved process under any circumstances, let alone a global pandemic. As of now, almost every industry has been impacted by COVID-19 in one way or another, and the real estate industry is no exception. Aside from the spread of the virus, it’s also important to keep in mind that we’re on the brink of a recession which may bring even greater unpredictability to the already uncertain financial and economic landscape, so here are a few factors to examine.
Evaluate Cash On-Hand
Do you have adequate cash on-hand or the ability to find sufficient financing, assuming that’s an option, for the type of property you’re looking to acquire? This is crucial in deciding whether or not to buy right now. In addition to funding the property, you should also consider how stable your income is, your job security and confidence in not being affected in the near future. While the decision to buy or hold off is up to you, we recommend committing to a new investment property only if you’re confident that you could survive any potential financing or timing hiccups along the way.
Prepare for Worst-Case Scenarios
Since we’re all in unchartered territory, it’s important to consider worst-case scenarios and timeframes instead of the standard ones. For example, if you’re considering a fix-and-flip project, the tools and resources needed may be out-of-stock or difficult to find or contractors may have limited availability. If you’re considering adding a rental property to your portfolio, it may take longer to find a suitable tenant or you may have to offer a discounted monthly payment for the time being. If you’re interested in purchasing a vacation home, it may not generate revenue in the next few months or well into next year. While it’s possible that none of these will actually happen to you, it is important to consider the what-ifs. If you’re certain that you could survive these undesirable situations, there’s no reason not to take advantage of the current favorable investment market.
Expect Some Changes
Even if you’re a seasoned real estate pro, the current landscape is not something we are accustomed to. But thanks to the current technological advancements, we’re able to adapt seamlessly without having to hit the brakes. With current stay-at-home requirements and social distancing guidelines, the property buying and selling process has gone digital. Of course, Hubzu’s platform has always been virtual along with many property auctions, but now, you’ll also find virtual tours and some sellers are offering virtual closings as well.
Keep in mind that real estate has been deemed as essential work, and some parts of the process may continue to be in person while following social distancing guidelines and guidance from your local government officials.
Seize the Opportunity
With the uncertainty in the air, those with the means to invest could find themselves with unbeatable deals. In recent weeks, there has been an influx of layoffs, furloughs and hiring freezes, making most people hesitant to commit to a new home or mortgage payment. Because of the decrease in buyers, there is far less competition in the market, especially compared to the typical uptick in the spring and summer seasons. As layoffs increase, auction home inventory will likely increase as well with more and more people being unable to afford their mortgage payment.
Additionally, if you’re planning on using a hard loan to finance your next investment home, you’ll likely be able to negotiate a better deal with interest rates hitting rock bottom. Lower interest combined with less competition and more inventory could provide some great deals you won’t be able to resist.
Everyone’s situation is unique, especially at the moment. If you’re able to take advantage of the current real estate opportunities, go for it! Your future self will thank you.
For additional resources to help you navigate the current real estate market, please visit our COVID-19 resource page by clicking here.