How to Make Money in a Post-COVID Real Estate Market
It has been a long time coming, but there is hope that we are entering the endemic phase of the coronavirus. The lifting of mask mandates in many areas is just one of many indications that life has returned to normal – although it is certainly a new normal.
Many sectors, including offices, retail and hospitality, have been impacted during the pandemic. There are signs of recovery, although the stock market is experiencing more than its fair share of ups and downs. If that’s too much for you, it’s time to diversify your portfolio.
While real estate investing comes with its own share of risk, there are smart moves that can pay off as we head into a post-pandemic real estate market. Here are four.
1. Add REITs to your portfolio
Real estate investment trusts (REITs) are the ideal solution for investors looking to diversify their portfolios without becoming owners. REITs own and operate properties in a variety of sectors, which include everything from healthcare to hospitality to residential.
There are two sectors in particular to watch after the pandemic: data center REITs and industrial REITs. The need for data and networking solutions has increased, especially with the shift to remote and hybrid workforces. So does the need for industrial and warehouse space to build, store, and move all the products and supplies we purchase in our growing reliance on online shopping.
Both types of REITs have been considered recession-proof because tenant contracts tend to be long-term – some industrial leases go up to 25 years – and guarantee a steady flow of income. And since REITs are required to pay out 90% of their taxable income to shareholders, those dividends can add up quite nicely, depending on your investment strategy.
2. Rent your vacation home
Airlines have lifted their mask mandates in the air, so many feel freer to move around the cabin – and around the country. In reality, the New York Times reported that the World Travel & Tourism Council predicted that US tourism would return to pre-pandemic levels this year, to the tune of $2 trillion for the economy.
Want to take advantage of this deal? Roll out the welcome mat for the tenants of your vacation home. Yes, you deserve some time too, but if you don’t plan on using your vacation home for the whole season, list it on a vacation site like Airbnb or VRBO (belonging to Expedia Group) for premium rates now that holiday plans are in full swing.
3. Invest in multi-family real estate
High property values coupled with rising interest rates have pushed many potential buyers to stay as tenants. Apartment List reports that rents are up 17.1% year over year. Investing in multi-family properties offers multiple sources of income through more than one tenant living under the same roof, whether it’s a two-family house or a multi-unit apartment complex.
If you don’t have the money to buy a multi-family home, you can consider options to turn your primary home into one. Whether you are renovating the basement into a legal apartment, building an apartment above the garage, or adding a cottage in the backyard, secondary suites (UDAs) represent an investment opportunity as well as a solution to the housing crisis.
4. Sell your home while the market is still hot
Strong demand for a weak housing supply continues, which has pushed property values through the proverbial roof. The median price is currently $375,300, up 15% from last year, according to the National Association of Realtors (NAR). Although buyer demand has eased a bit, with sales down 2.7% in March, NAR reports, it’s still a great time to take advantage of a real estate market that’s very seller-friendly.
If you’ve owned a property for a while and decide to sell now, you can make a nice profit. But if this is your primary residence and you’re looking to move, be aware that most of that profit could be taken up by buying a new home, unless you downsize or move to an area of the country where the cost of living is lower.
Whether you want to be a homeowner and own multiple properties or take a more passive investment approach and add REITs to your stock portfolio, real estate investing offers lucrative opportunities in a post-COVID market.