Early in 2020, when the pandemic first hit, many homeowners and investors panicked, bracing for a market crash. COVID-19 shook up the entire world, and the real estate industry was no exception. Following a brief pause, however, much to everyone’s surprise and amazement, the market picked back up with a vengeance. While many businesses are still shut down or have permanently closed, the housing market has exploded. With home sale prices and demand at a record high, countless investors are chomping at the bit for a chance to get in on the action.
“Whosoever desires constant success must change his conduct with the times.”
– Niccolo Machiavelli
Any good real estate investor knows that to stay competitive, one must always be learning and evolving their strategy. The pandemic has surely changed the playing field for many investors, but with a new market come new opportunities. Here are our top 3 investment strategies to consider in 2021:
Rental properties (i.e. buy and hold)
Unless you’ve been living under a rock, you’ve surely been bombarded with news about the nationwide housing shortages. The high demand combined with historically low inventory and low interest rates has led to a staggering increase in home prices. An average investor and home-buyer are constantly being bid out, making purchasing a home an unattainable goal. These bidding wars are affecting affordability, and most households are forced to resort to renting for the foreseeable future. This of course creates a massive need for rental properties, making long-term rental housing one of the best investment strategies in the current market.
If you’re new to buying rental properties, do your research and make sure to choose the right location for your rental. Consider purchasing something that needs a little work. In addition to creating a cash flow, you can force equity and improve your overall ROI by doing even a few small improvements.
Fix-and-flip is a strategy where one buys a property, – typically below market value – which needs work, renovates it, and sells it at a profit. Over the past few years, fix-and-flips have become increasingly popular with investors, with competition in high-demand markets getting quite fierce. When COVID-19 hit, a lot of investors put their buying efforts on hold and some even sold off their existing projects, bracing themselves for a possible downturn. This pause was short-lived, however, since the expected correction never materialized and the real estate activity resumed in the summer of 2020. Since the inventory was at a record low, this created even more competition than many investors ever experienced prior to the pandemic. Challenged to find “good deals,” some investors decided to shift away from the fix-and-flip strategy for this reason. However, the fix-and-flip may be making a comeback in 2021 as COVID-19 has created a unique opportunity in the market.
Due to the mortgage forbearance under the CARES Act, certain property owners who were unable to make their monthly payments were protected from foreclosure. Once the mortgage forbearance is lifted, this will likely result in a surge of foreclosures. Having an influx of distressed homes will provide investors with a new opportunity to purchase, below the market value, properties which they can then rehab and sell.
It is important to understand, though, that the fix-and-flip strategy is not for the faint of heart as it can be risky and very demanding. But with great risk and sacrifice comes great reward, which is why this continues to be one of our favorite investment strategies. With proper planning, knowledge, and experience, it can prove to be a very profitable endeavor.
The COVID-19 pandemic brough short-term rental business to a screeching halt. With strict lockdowns and understandable fear of infection, most people cancelled all travel plans, nearly overnight creating a drastic drop in Airbnb occupancy rates. Having no indication of when travel will resume, to avoid more losses of rental income, many Airbnb hosts were forced to fill their properties with long-term tenants.
More than a year has passed since, and things are beginning to look a little more “normal.” With nearly half of the US population vaccinated against COVID-19, restrictions are easing up, and people are starting to slowly resume their regular activities. Sick and tired of being cooped up for so long, many people are beginning to travel again. However, travel in 2021 looks much different than it did pre-pandemic. Although starved for adventure, most people are still nervous and cautious about going outside of the country and are resorting to local travel and “staycations.” This has created a massive spike in demand for vacation rentals, and Airbnb hosts are now the busiest they’ve ever been!
Domestic travel will likely continue to boom, and the short-term rental market has lots of room to grow. Now is a perfect time to capitalize on this investment opportunity.
These are just a few of our best real estate investment strategies for you to consider in 2021. Remember, there is no one right way to make money in real estate. Do your research and choose whichever option works best for you, your lifestyle, your goals, and your dreams.