Guest post by Katie Conroy
Experts are predicting the coronavirus pandemic will trigger a recession that ripples throughout the economy. After the rock-bottom prices and interest rates seen in the Great Recession, many would-be real estate investors are wondering if this is the ideal time to step into the real estate market.
Real estate investing on the brink of a recession can be a smart move, but it’s also risky. There’s no equation for recessions, and just because the last recession sent the housing market plummeting doesn’t mean this one will too. In addition, there’s concern about investors’ own financial security as well as their ability to sell or rent properties when so many are out of work.
But where there are challenges, there are also opportunities. First-time investors who are in a position to buy benefit from low rates and low competition in a market that just recently saw the lowest housing inventory on record.
What to Know Before Buying Property During Coronavirus
The full effects coronavirus will have on the housing market remain to be seen. While Oahu’s market is starting to show the first signs of slowing down, prices are still holding strong. The median single-family home price was up 3.5% in March compared to the same time last year.
Hawaii Governor David Ige did pass a temporary executive order allowing remote online notarizations during the coronavirus outbreak. With the ability to close remotely, buyers can purchase real estate while social distancing.
The Best Model for Real Estate Investing in a Down Market
Real estate investing in a recession is all about strategy. As Seek Capital explains, flipping is a fast way to make money when demand and prices are high, but flippers are unlikely to see a profit in a recession. Instead, first-time investors should enter the market with the long view in mind. People need housing even in a recession and investing in long-term rentals is a smart way to cover a property’s costs while waiting for the economy to recover and prices to appreciate.
How to Get Rentals Market-Ready on the Cheap
Attracting reliable long-term tenants requires a quality rental. At the same time, investors don’t want to invest in high-end finishes in a property that’s likely to see a lot of wear and tear before it sells. Instead, investors should look for durable, inexpensive finishes that look good.
Flooring is one of the biggest questions for rental property owners. In bedrooms, opt for a low-cost carpet with a thick pad for a more high-end look and feel than Berber while still coming in at a low price. In areas you need hard flooring, Bob Vila suggests turning to wood-look laminate or vinyl tile and planks.
Other updates to make include repainting, replacing light fixtures, and installing new hardware on doors, cabinets, and faucets. These changes are easy to do and make a big difference in a property’s appearance. Landlords should also take basic maintenance steps like changing air filters, servicing appliances, and scheduling a professional cleaning before the first tenants move in.
The final step first-time landlords have to take is deciding if they’ll self-manage their property or hire a property management agency. Be sure to factor your bottom line when making property management decisions, but don’t undervalue what professional management could bring to your property.
As you can see, it’s not a bad time to be an investment buyer. Those who purchase in a recession benefit from ideal market conditions for buyers. However, it’s important to be prepared for a long-term investment along with all the responsibilities of managing a rental property. While it’s not the right fit for every real estate investor, for those who enter the market right now, buying can pay off.