While economic downturns present a variety of challenges, they also present several opportunities. And as the coronavirus pandemic has upended life as we know it, it has still created opportunity – and perhaps no opportunity is more significant than what exists in real estate right now.
Unlike the great recession that decimated the real estate industry, it’s stayed resilient so far throughout this current downturn we’re in the midst of. Interest rates are still low, which makes buying a new home or refinancing an existing property attractive, and the overall market now favors buyers. What’s more is that even as of April 2020, U.S. median house prices are still increasing in value. Yes, residential real estate remains a wise investment, and commercial real estate can still present long-term benefits.
We’ve outlined some tips for buying in a downturn here:
Don’t Let the Challenges Dissuade You
These are universal unprecedented times, and every industry and company is changing in some way. In real estate, virtual showings have largely replaced in-person ones, but don’t let that dissuade you from seeing homes if you’re interested in buying. This is especially true as states ease lockdown restrictions, as there is sure to be an uptick in real estate that’s synonymous with the spring and summer sales seasons. This sales season may not be as significant as it was in years past, but it’ll still be important to beat the rush if you’re in the market for a new home.
Be Wary of Commercial Investment
While home buying is one thing, commercial property investment is another. And right now, the commercial real estate market has dipped by nearly 30 percent, notably in the hotel and resort space. And all indications suggest that a return is going to be very gradual in commercial properties. It can be an attractive time to invest in one, so long as your expectations are tempered. It can still make for an additional long-term source of income and a way to diversify your portfolio, although there is significant short-term risk. While hotels and resort spaces have been critically effected, other commercial markets – like healthcare and logistics – remain strong. Industrial markets are also showing signs of resiliency. Unlike residential real estate, commercial has more high-risk, high-reward potential.
Build a Strong Foundation
Whether you’re investing in residential or commercial real estate, it’s not something that should be done blindly. It’s why nearly all experts advise individuals to establish a strong foundation before signing any agreements. Usually it’s suggested that this foundation consist of setting aside anywhere from three to six months worth of your salary in a rainy day account to help in case things take a little bit longer to get off the ground. These funds should only be used in the event of a financial emergency. In addition to establishing an emergency fund, it’s also important to ensure you have enough money for any legal and closing fees that come with purchasing a property.