One of the biggest topics on the minds of just about everyone over the last three weeks is coronavirus, the virus that’s now in the United States. The big question is how will coronavirus affect the real estate market?
In this article, we will answer this question and provide you with insight into what to expect from the real estate market moving forward.
Coronavirus – How To Move Forward As An Investor
30 days ago, the word was just starting to leak out of a virus that had started to impact Wuhan China, that virus would soon be known as coronavirus, a virus that would soon develop into a pandemic that’s affected most of the world.
Sadly, as of today, coronavirus has been responsible for shutting down many industries, businesses and its also incited fear into the U.S. Stock Market. The fear that investors are facing has been responsible for wiping out all stock market gains made under President Trump during the last 3 years, in just three weeks.
Following the onset of coronavirus, the Federal Government lowered mortgage interest rates by half of a percentage point and over the weekend the Fed also announced that they were dropping interest rates to zero plus they would buy at least $700 billion in mortgage and government-related bonds.
How has coronavirus affected the real estate market? With rates at the lowest they’ve been in 50 years, it’s without a doubt an ideal time for investors to add new rental properties to their portfolios, especially multifamily investment properties.
Even though it’s a great time to buy, we could see the real estate market affected in the following ways over the coming months.
Purchase contracts – If self-distancing and quarantines continue for another 30 days or longer, we could see purchase contracts and home sales begin to collapse as a result of coronavirus. This is understandable considering that many people are unable to work right now and they won’t want to buy a home if they can’t work.
Construction changes – Even though housing permits have remained strong over the last year, we could see more contractors putting the “brakes” on their housing construction projects in the United States for the coming weeks or months until coronavirus is contained.
It’s likely that when Q2 statistics are released we’re going to see coronavirus “carnage” in the real estate market that will last into Q3. By Q4 things should start to improve for the real estate market and the economy as a whole could be affected once again if a new President of the United States is elected.
Renters – Another consequence of coronavirus is that many renters across the United States are not currently working because most customer-facing businesses like restaurants, bars, gyms, and health clubs have been shut down.
The good news for the American worker is that the Trump Administration has promised to immediately start sending out checks to households across the United States. These payments along with other strategies the President’s economic team is using could function as a “stopgap” until those people who are not allowed to leave their homes can get back to work.
Although likely, lockdowns like what we’re seeing in San Francisco may only continue until the end of April at the latest, it’s possible that we could see quarantines and lockdowns continue for up to 3 ½ months or more.
Coronavirus Is A Great Time to Buy Multifamily Rental Properties
Even though the real estate market faces hurdles ahead for traditional buyers, and the stock market has been declining in value recently, the reality is that right now is an excellent time for investors to add rental properties, especially multifamily properties to their portfolios.
Why invest in multifamily? A multifamily property like an apartment building, condo or townhome offers investors income stability during these trying economic times.
Rental properties will always be in demand regardless of the state of the U.S. economy or what’s happening in the world.
Many investors who are tired of dealing with losses in their investment portfolios will most likely be a move to investing in rental properties within the coming weeks and months.
The keys to success with investing in a multifamily rental property remain the same:
Choose the right area – Make sure that the multifamily property that you invest in is located in a great area that’s close to shops, stores, jobs, and a good school district.
Do a comparable analysis – Always research other comparable properties, and the area as a whole, to make sure that you’re not buying a multifamily property at a time when the real estate market in that area or property values are in decline.
The property must be inspected – Hire an inspector to thoroughly inspect the multifamily property, including each unit. This will help you to know exactly what you’re buying and it’s also going to help you avoid investing in a building that will be a huge waste of money.
Review the financials – You will want to go over the financials for the property as well, including the rent roll, just so you can see if what the owner is claiming that the property is earning matches up with the income that’s coming in.
Hire a property manager – Don’t “go cheap” when it comes to management. Always take the time to hire a property manager because this will save you the hassle of having to manage the property yourself, and it will free up your time to grow your portfolio of investment properties
Are you an accredited investor who wants to invest in multifamily properties but you don’t have the time? If so, I invite you to contact me.
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My team and I manage close to $80,000,000 in properties across multiple states and are actively growing our portfolio this year.
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