Itay Barak and Tal Valeriola on Investing in Real Estate in 2020 Amidst the COVID-19 Crisis

The Coronavirus pandemic has left a sour taste in the mouth of a majority of the world’s population. The effect of the pandemic is so much that many countries are seeking aid from others. Businesses have been adversely affected. Employers have had to cut their staff strength to cushion the effect of the pandemic on their businesses. At a point, the world seemed to have been brought to its knees as virtually everything had been brought to a standstill except the race to find a cure or vaccine for the rampaging virus.

Tal Valariola:

“Many people have filled for unemployment claims in many countries, which places more responsibilities on the overburdened shoulder of most governments. Investment opportunities have also been nosedived in several areas because of the absence of a ready market for services offered and products made by manufacturing and services-oriented companies. 

But do you know that even amid this pandemic, there are still those who are investing in one form of business or the other? Yes, some people have had cause to invest wisely in this harsh economic period. You can also be part of them, but first, you have to know the viable investment sectors to invest your funds. 

One very lucrative investment venture in this coronavirus era is real estate. How is real estate viable at such a time like this you may want to ask. We shall get to find out in this article.”

Why invest in real estate amidst the COVID-19 pandemic? ,

The secret to increasing your investment revenue is investing in a business with a very high potential to yield interest. Such a business should also tend to give you your ROI in a short period. How then do real estate investors come up in this aspect? As economic hardship bites harder due to the lockdown orchestrated by the coronavirus pandemic, many countries are falling into economic depression. The resultant effect on citizens is that they have little or nothing to fall back to since their sources of income have been cut short. 

The following are reasons why you should invest in real estate amid the pandemic.

• Real estate properties are cheaper now.

Many are forced to sell off their properties at giving away prices because they have to meet up with other paramount needs. A wise investor may see this as an opportunity to buy real estate properties at reduced prices and hope to sell at a much higher price when the lockdown eases. According to investment law, the price of a real estate property increases if the demand for such property is high. Let’s take, for example, Mr. Adams wants to sell his property that is worth over $300,000 due to the overwhelming effect of the pandemic on his finances. His business has shut down totally, and even if the pandemic ended, it would take a couple of years for him to get back to his feet. He sees no other option than to sell off his property, which has been estimated to be in the range of the above-stated amount.

But the issue is Mr. Adams since no potential buyer of his property and the ones he sees are not willing to pay such amount because they also claim to be affected by the pandemic. Mr. Adams weighs his options and feels that survival at the moment is more paramount than trying to build a dead business from scratch without any available capital may be a futile exercise. He is left with no other available choice than to sell off the property at a much-reduced price than it’s original worth. Mr. Fred sees Mr. Adam’s desperation to sell off his property and offers a one-time payment deal of $1500,000. Mr. Adams sees that he has no other choice and decides to accept such conditions to sell his property.

• Real estate prices will rise.

In the real estate industry, there is usually a time of massive boom and a time when prices of real estate properties plummet. There are other times when prices may remain stagnated without experiencing a sharp increase or decrease. During a period of economic recession, many people would not want to pay more properties. The amount placed as rent on properties may also reduce as most people might not have the money to pay for high rental fees. Such a scenario is what is experienced during this coronavirus pandemic. But what happens when the reverse is the case. 

During an economic boom, the demand for real estate properties increases, and so also those their prices. Since the demand for real estate properties increases, Property owners tend to increase the renting and selling price of their properties. We await such a time as the world slowly heals from the pandemic effect. From our illustration about Mr. Adams, the property seller, and Mr. Fred, the buyer,  Mr. Fred, pays for the property and is said to be waiting patiently to tripple or quadruple his gain pandemic is over.

Economic activities are gradually returning to normal, and prices of real estate properties are also starting to experience an incline. For those who had invested in real estate even when the pandemic was at its peak, they may soon begin to reap the benefits in the not too distant future. 

• Real Estate properties are readily available.

The availability of real estate properties is a primary determinant of its price. Many real estate properties are becoming empty because many occupants can not afford to renew their rents. Some investors who have bought real estate properties with the intent of selling them might not be fortunate to sell them due to the coronavirus pandemic effect. 

These two scenarios have led to an increase in the availability of real estate properties. According to economics, increased availability leads to a decrease in price while scarcity results in the price increase. As a viable investment strategy, buying real estate properties when they are readily available might be a good approach because what is readily available today may become scary tomorrow. You might kick yourself off, not taking proactive steps to invest in real estate when you can do so.

What type of real estate can you invest in during this pandemic? 

Real estate is a broad term that encompasses every form of commercial and residential property. We shall explain these types of real estate and how you can invest in them in 2020 during the coronavirus pandemic era. 

Commercial Real Estate 

Commercial real estate is a real estate property where commercial activities are carried out. The intent of renting or purchasing commercial real estate properties is to generate revenue. As a potential investor, there are several types of commercial real estate properties that you can delve into even in this coronavirus era. They include the following:

• Commercial Land

Commercial land may be any form of land that is used for commercial activities. It could be an open space that may be used as a parking space for vehicles or other automobiles. Commercial landed properties are also used as relaxation centers, amusement parks, or any other outdoor events. It is understood that most governments have imposed either total or partial restriction of movements in their respective countries. 

Still, the truth is investing in commercial land might yield a lot of benefits soon. Come to think of it, how do you think people will feel when given a chance to go out for recreational activities. Many people would be happy to do so because they have missed hanging out in such a relaxed environment.

Investing in commercial land as a form of real estate investment may pay off in the long run. Purchasing such property when the need and demand are minimal may earn you outstanding and increased investment returns after the pandemic.

• Warehousing

Warehouses are another type of commercial real estate where raw materials and other finished products are stored. Warehousing is a very lucrative business opportunity and has a good potential of generating revenue you especially if the products being stored are in high demand. Since the start of this pandemic, there has been a fall in manufacturing activities worldwide. 

However, there is a surge in the manufacture of specific products of high demand during the COVID-19 crises. You can either choose to invest in warehouses where products highly demanded in this coronavirus period are kept, or you decide to invest in warehouses that can be used for storing other commodities because such warehouses might be sold at reduced prices during this period. 

• Office spaces

Commercial buildings that are used as office spaces Are another viable real estate investment during the pandemic. A standard office space usually comes with standard utility and office designed structures to avoid spending more on repairs and maintenance. Since most offices are closed for business, investing in office spaces as a commercial real estate type may be wise. 

The secret to investing in real estate when many people are shying away from doing so is because they may be less expensive at this time. When most offices open for business after the COVID 19 pandemics, there will be a surge in demand for such properties, and you might be more than willing to make the best out of the situation.

• Shopping malls, restaurants, and cinemas

Cinemas, restaurants, and shopping malls also under the category of commercial real estate. These properties have very high investment yield; hence it might be wise to invest in them. As the restriction of movement slowly begins to ease, shopping malls, fuming centers, and cinemas will soon open fully for business. 

You may cash in on the opportunity if you have invested in these commercial properties when their prices are low. At present most restaurants or cinema owners feel the harsh realities of having to close shop for so long without any cash in-flow. Some are willing to sell off these properties to interested buyers at reduced prices. You can identify such distress sales by contacting your broker or searching for it on different real estate websites bearing your preferred location.

Residential Real Estate 

Apart from investing in commercial real estate properties during this pandemic, another type of real estate you can invest in is residential real estate. Residential real estate refers to buildings that are designed for residential purposes. Investing in residential real estate properties during this pandemic may not seem plausible to you now, but it is wise to consider the long term benefits. 

Itay Barak:

“At this time, there is a decline in the demand for these properties. Most property owners have even lowered their lease or rental price to cushion the pandemic’s effect on their tenants. Since the industry is not as viable as it used to be, fewer people are investing in residential real estate, thus making residential houses to be in surplus. This is the time to invest in the industry as you might enjoy the dividends of your investment when the residential real estate boom begins.”

Types of Residential Real Estate you can invest in during this pandemic.

There are different types of Residential Real Estate properties. Each of these residential properties has its unique identification and structure. Residential real estate types include the following:  

Condominium

Condos are a type of residential real estate that consists of single-unit homes enclosed in a larger building or within a community of its own. Each condo unit usually share walls with other units and are run under house owner association guidance by paying either monthly or yearly rents to the homeowner. Investing in this type of real estate at this time may come in handy in the long run. 

Other types of residential real estate properties include:

• Single Family Home
• Townhouse
• Multi-family home
• Residential land

Factors you may consider when investing in real estate during the COVID-19 crisis 

Before investing in real estate, especially at a time like this, when the coronavirus pandemic’s effect is still felt globally, it is advisable to consider some factors that would help you in making the right investment choice. The important factors to you may consider when investing in real estate include the following:

• Where is the property located?

The location of any real estate property plays a significant role in determining the worth of the property. Properties located in choice areas tend to attract more investment capital. It might be wise to buy properties in locations where social amenities such as good road networks, electricity, hospitals, and other essential facilities are located. 

Buying properties that are close to a popular monument or location is also important.

Since you are buying the property at a reduced price due to the pandemic, selling it may be easier if it is located in areas with adequate amenities. However, if you cannot find properties to buy in choice locations or close to a popular place, then be sure to invest your money in one that has access to basic social amenities.

• What is the cost of the property

One of the reasons you are buying a property at this COVID-19 era is because you believe it would be sold at a much lower price than it’s worth. So before buying any property this period, ensure that the property’s selling price is below the worth of the property. Otherwise, the purpose of buying the property at this critical time might not be met. 

• What is the type of real estate you want to purchase?

We have highlighted several types of real estate properties that are viable investment opportunities for potential real estate investors. After the pandemic, there will be a likely surge in demand for commercial real estate properties over residential real estate. What this means is that people would want to get back to building their business. 

They may even choose to sacrifice other personal luxuries, including acquiring more comfortable homes or other forms of residential real estate properties to revive their businesses. So it might be a good idea to channel your real estate investment into acquiring commercial real estate properties such as office space, commercial land, warehouses, event centers, cinemas, shopping malls, supermarkets, recreational parks, etc. 

Conclusion

The coronavirus pandemic may have caused a lot of economic hardship to business owners, employees, and even countries. Many jobs have been lost, and many fill for unemployment claims every day to get palliatives from the government. Properties are being sold far below their worth because of the need to have something to hold on to as the effect of the pandemic continues to be felt. 

In every problem, there may be an opening to make the best out of it. At this point, investing in real estate may be a viable business opportunity. Ensure that you make the best of this investment opportunity, and you may reap the benefits later on. 

This post it brought to you by Itay Barak and Tal Valeriola