There is a reason why real estate investments are always prominently featured in the portfolios of billionaires and other big-time investors. They are reasonably stable, offer attractive returns, and can generate wealth if you have a solid real estate investment strategy.
That said, the global COVID-19 pandemic has upended most business and investment sectors. Real estate is not an exception. For instance, the volume of commercial real estate investments has fallen all over the world. They dropped 29% globally in the first half of 2020 compared to the same period in 2019.
This year may be extremely challenging for investors, but it’s also ripe with opportunity. The key is to adjust your investment strategy. To do that, you need to pay attention to the top trends that will drive the industry during and after the pandemic:
Greater Demand for Residential Properties vs. Office Spaces
Many businesses are shifting to remote work set-up as a result of COVID-19. They’re now moving a large portion, or all of their processes online. Instead of working on-site, businesses utilize software like Skype, Zoom, and email to meet and collaborate.
This impacts not just the future of work, but real estate investment as well. Many businesses are planning to continue the arrangement even after the outbreak has passed.
This has a two-way effect on the demand for office space. One, workers and business owners are focusing on securing residential property. The ideal properties are conducive to remote work. Locations that are near amenities like groceries and hospitals – all of which reduce the need to travel – will be in high demand.
On the other hand, office spaces in premium locations are likely to appreciate in value. As businesses reduce the number of office-based workers, they also prefer their high-echelon staff to move to prestigious and central areas.
1. Real Estate Investors Are Leveraging Technology
There may be movement and travel restrictions in many places worldwide, but this hasn’t stopped the real estate industry. Slowed down, definitely, but not to a standstill.
To counter these limitations, real estate buyers and sellers are going digital. Virtual open houses, transactions, and inspections are replacing face-to-face interactions.
If you’re a seller, focus on creating the most immersive experience possible for your buyers. Use AR programs, live streaming, and plenty of professional photos and videos to show your properties. This allows buyers to get to know the property and increases your chances of closing.
If you’re a buyer, always do your due diligence. Digital multimedia assets can be manipulated to make a piece of property look better than it truly is. Elements as simple as photo angles and lighting can have a massive effect on how the property looks.
Instead of relying solely upon photos and videos, look for sellers who offer advanced digital inspection systems. You can get a clearer sense of a property through AR and live video than static photos and videos alone.
2. Property Valuation is Constantly Changing
Expect a shake-up of real estate valuation based on the rapid preference changes of investors and buyers. That’s a critical thing to keep in mind if you intend to buy a property soon, or own some.
As outlined earlier, the potential long-term shift to remote work is likely to make office spaces less profitable, affecting their valuation. If you have them in your portfolio, experts recommend disposing of them ASAP before the depreciation sets in.
However, you need to factor in the location as well. If your property is in a prime area, consider holding onto it longer. The price may go up as companies decide to move their core team to high-end locations.
Since the price can fall soon, buyers may want to wait before closing a deal for office spaces. That is unless the property you wish to buy is in a prime area. In that case, consider buying it as soon as you can so you can benefit from the greater valuation.
Is Real Estate Still a Smart Investment in 2020?
Absolutely. The 2020 real estate market may be undergoing significant shifts right now, but all the things that make it an excellent investment still ring true.
Here’s why you should continue investing in real estate post-pandemic and beyond:
1. Real estate has tremendous value as a tangible asset
There will always be value in your property and land. Other investments can have little to no tangible asset value. For example, the value of cars depreciates drastically the moment you drive it off the lot. Even stock prices can dip to zero.
- Pro Tip:
To protect your investment against worst-case scenarios, make sure to get the best homeowners insurance policy possible.
2. The value of real estate historically increases over time
Throughout the years, history has proven that the longer you hold on to your property, the greater the ROI. Past bubbles may have caused home values to slip, but the market has always bounced back. Those who’ve held their properties during those bubbles saw prices and appreciation return to normal.
3. Real estate investments are an excellent way to diversify your portfolio
Any financial planner will tell you that diversification is crucial to successful investing. A diverse portfolio spreads out risk. In other words, even when one of your investments fails, you won’t lose all of your money because it’s not the only one you have.
Because real estate is a safe tangible asset, it helps to significantly mitigate risk. In fact, many people have grown their wealth through real estate investments alone.
Fine-Tune Your Real Estate Strategy for a Post-Pandemic Market
2020 hasn’t been an easy year for the real estate industry. Expect the effects of COVID-19 to ripple through the next few years, but don’t let it discourage you from investing.
The ability to adapt is more important than ever. To make an informed decision, keep a close eye on developments in the real estate sector. Modify your strategy accordingly, and trust in the real estate market’s remarkable ability to recover from adversity.
Tycoono Media Inc. and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. Please refer to our disclaimer for more information.