Should I Invest in Real Estate in the midst of COVID-19?

In the face of this information, many real estate investors have decided to move their money from commercial real estate to residential real estate, particularly, multifamily.

• Multifamily Outlook

With the economy being shut down partially, most service industries were forced to furlough or lay off their employees which are predominantly renters. It was reported that 32% of U.S. households will miss housing payments, mortgage, or rent payments starting in July when unemployment benefits begin to expire. The fear of non-payments of rents triggered policymakers to introduce an expanded version of the Eviction Moratorium to protect more tenants nationally. It is estimated that 20 million renters will be at risk of eviction by September of this year. The highest evicting rates are in cities located mostly in the Southern region of the United States. The battle between landlords and tenants has become more severe amid COVID-19. Mom-and-pop landlords express their frustration over the government providing extended protection for the tenants but neglecting the livelihood of smaller landlords. Prior to COVID-19, nearly one-third of Americans struggled with housing payments.

• Should you invest in real estate?

Many institutions are still actively buying real estate, because they now have more leverage to negotiate in addition to the record low mortgage rates. However, with the uncertainty of the market, commercial lenders have tightened their guidelines recently which requires more down payment and reserve. The opportunities still exist, but it is more important than ever for us to run a conservative ten-year cash flow analysis for our clients prior to making an offer. We have to remind our clients to offer based on our analysis, not their emotions. Some of you may be thinking about giving up your real estate investing adventure due to a lack of cash, but there are still many ways for you to be involved in real estate investing with creative strategies! As always, please consult a trusted real estate investment advisor to guide you through your real estate investing career.

Topics: Real Estate Investment, Housing market, COVID-19

Work cited: Helen Chong, Forbes, July 24, 2020

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