There’s no question that the world changed this year, with a sudden shock that left nearly everyone stunned. While the 2008 collapse brewed for at least a year, and those of us who have been real estate professionals for a long time knew it was coming, COVID-19 seemingly happened overnight. One week we were wondering if America would be deeply impacted and a week later half the country was out of a job.
That suddenness left a lot of people wondering what would happen to the real estate market. Is now still a good time to invest or is it better to sit back for a bit?
As someone who has been involved in real estate investing for decades, I know that uncertain times are sometimes when we can do our best work. This particular recession actually offers more opportunities than the Great Recession. Let me tell you about the biggest benefits of investing in real estate—yes, even right now.
9 Benefits of Investing in Real Estate Right Now
Right now, we have a chance to do work that matters. We can help homeowners in challenging situations by getting them the cash they need. And, we are positioned to make a difference in the community. We’re creating housing opportunities throughout the recovery. But, there are even more benefits to real estate investing. Here’s your rundown.
1. Distressed owners will be looking to sell fast
Within weeks of the novel coronavirus crisis, nearly 30 million Americans were suddenly unemployed. For some it was temporary, but for others, it still is potentially long-term. While there has been some state and federal relief, the future is uncertain. But, what is certain is that, temporary relief or not, bills are coming due.
Before the pandemic, foreclosure rates were at record lows. That isn’t the case anymore. Real estate loan delinquencies are rapidly increasing, with estimates as high as 8.75% by the end of the third quarter. The pre-foreclosure rate is inching up as well, with June seeing a 3.1% increase over May. Considering where we were before the pandemic, these numbers are staggering.
Right now, there is some mortgage forgiveness but it isn’t universal and won’t be permanent. People will be looking to sell before they get foreclosed upon, with all the long-term problems that foreclosure entails. So, they’ll be looking for someone to take the “ugly” situation off their hands.
That can be you. Your ability to buy right away means not being entangled in paperwork. You give them peace of mind, quickly. That’s incredibly valuable in these deeply uncertain times.
The benefit for you is that, in a market that has been tightening, there is a new stock of houses about to become available. A lot of times in real estate investing, you are searching high and low for houses. Now the houses will suddenly become much more plentiful.
2. Houses in up-and-coming neighborhoods may become available
One interesting part of this recession is that workers in traditionally low-paying jobs, like grocery clerks, have kept their jobs. They’ve been more needed than ever. So, the unemployment numbers have hit the areas of the economy that previously seemed more stable. Professional class homeowners who bought a house during the good times may be in a sudden jam.
This impact means that houses in areas that don’t usually have a lot of these quick-sale situations will be on the market. Houses in up-and-coming and established neighborhoods, especially among the hardest-hit areas, will be among those for sale quickly. You don’t have to do a ton of research to know that a home for sale in a hot neighborhood is a good thing.
Normally, in this business, you are spending a lot of time looking for that hidden gem, the place that is hard to come by and has high ROI. Now the gem could be looking for you.
3. Available houses could need less work
You know the feeling when you see a run-down house and imagine its potential. You do the calculations to figure out how much work you need to put into it and what you can sell it for. It’s all a matter of buying low enough and keeping those rehab costs in check.
But, while most houses might need some work, buying a house from someone who until a few months ago had a steady job usually requires less fixing. These are houses that were taken care of by people who had income. They didn’t start to fall into the cycle of neglect that requires a full-blown rehab.
That’s not to say that every house on the market is 100% fine. But, it is more likely that you will find a house that requires less money for the rehab and, in turn, less turnaround time. Both are a perk in this economy.
4. You have an inside edge on what work is needed
Here’s a short bonus: you know what people are looking for. More home office space. More comfortable social distancing. More room for kids to learn and play at home. This is a weird physical and mental economy where everyone is looking for the same thing: a way to make their home their office, their school, their playground, their restaurant, and everything else.
Knowing all of this can give you an edge in a lot of different ways. You’ll be able to line up your resources—contractors, material, labor—right away. You will be able to start planning before you even close. This is another way to reduce the time it takes to turnaround the project.
Not only that but knowing what is needed can help you calculate if a potential buy is worth it or not. Knowing what is going to sell means understanding the amount of work and costs that will go into selling it. If that doesn’t add up, you can bow out before you’ve sunk a lot of costs. That’s one genuine advantage of this market.
5. There are still a lot of buyers
Another unusual aspect of this recession is that there are a lot of people whose professional lives haven’t changed beyond suddenly working from home. I know a lot of people who have bought and sold to move over the last few months. Some are looking to move away from big cities. Others are looking to find homes with more office space or room to homeschool. Almost everyone wants more backyard or access to outdoor space. As we adjust to whatever “normal” will be, those in the market to buy have very specific needs.
And, achieving their homeownership goals is more affordable than ever. Interest rates are at record lows and still going down. It makes sense for them to get out from under a higher interest rate mortgage with some equity and buy their dream home or to become first-time homeowners when the getting’s good.
This optimism about the market is not just anecdotal. Most real estate investors believe that there will be little long-term impact on their business or the broader economy. In fact, according to a recent study, nearly 80% of real estate investors believe that the impact on their business will last fewer than 12 months. A full 42% believe that the impact will last, at most, 6 months, with 12% saying there isn’t any impact.
An economy where there are not a lot of people are selling but people are buying as normal offers incredible possibilities for all aspects of this business. This includes fix-and-flipping, but it also includes getting started in wholesaling. After all, you’re not the only one who knows this is a great market. If you have a line on deals, you can potentially see a lot of volume.
You can sell in this same market without having to slash prices. You don’t have to worry about sitting on a home waiting for the market to pick up, because, across most of the country, it already has.
6. Rebuilding the community is the best kind of marketing
This is one that I can’t really overstate. Everything seems so deeply uncertain right now. Parents don’t know if their kids are going back to school. We don’t know when we’re going to be able to return to “normal” like before. We don’t know what “normal” is ever going to mean again.
But, we do know people will be needing help in a tough situation. We do know that people will be looking to buy. We know that housing is one of the most important issues there is and that, as a real estate investor, you are at the forefront of rebuilding certainty during these times.
In doing so, you’re going to help to build your own reputation. If you’re the person who is working during tough times and getting people into homes, that’s its own form of marketing.
Also, if you are paying contractors to do work on the houses and purchasing your materials locally, you’re keeping people employed during times of great uncertainty. That helps give you a reputation as someone with whom people want to work. Building a network of contractors who trust you and are motivated to do their best work means better results for years to come.
You get houses and turn them into homes. You’re keeping hard-working people in your community employed. What’s more normal, and more important, than that?
7. Real estate has been more consistent than the stock market
I’m writing this article in August of 2020. The Dow Jones is at about 26,500, which is historically very high, but down from its height of 29,000 earlier this year. Of course, that means it is up from its low point this year at 20,000. All of this is to say that the market, as you’ve probably noticed, is incredibly volatile. It reacts to shocks both big and small.
What hasn’t really reacted to the shocks has been the real estate market. Indeed, Fannie May estimates that prices will rise 4% over 2020. Why is that? Because while demand might have dropped, the overall supply, which was already tightening, has dropped even more.
Percentage Change in Houses Listed YOY for 2020
Good houses are in high demand. If you are able to buy good houses, you have the inside edge on a market that is considerably more reliable than the stock market. It’s how you can make your investments work for you.
8. A Solid Long-Term Financial Strategy
For many Americans during this pandemic, the idea of “long-term planning” has seemed like an oxymoron. How are you supposed to plan for the long-term when the rug has been pulled out from under you? But, if you are in this business, the long-term looks very bright. There are a few reasons for that.
- A potentially steady cash flow from turning properties around or renting them out.
- A hedge against inflation that is predicted to jump to over 2% next year, which is historically not super high but still a shock compared to this year. Inflation only increases the value of your property.
- The tax benefits that come with investing. You may be able to write off marketing, depreciation, insurance, travel expenses, legal fees, and more.
All of this gives you more control over your money. And, that’s something you just can’t find in most other jobs. In fact, control is one of the main benefits of investing in real estate.
9. Be your own boss and control what happens
To me, control over my work life is hugely important. So many work sectors have been decimated. The sectors of the American economy that are most vulnerable to pandemic shocks employ over 20 million people. The national unemployment rate is 11.1%. People who thought they knew what the future held are suddenly deeply uncertain.
That’s all tragic. I’m lucky to be in a business where my work is in my control. Not only is my sector not immediately vulnerable, but it is actually thriving. I don’t have to worry about a pink slip.
That’s what is great about being your own boss. There are external factors that impact potential success, sure, I don’t have to worry about my hard work being rewarded by getting laid off. So many hard-working people don’t control whether they have a job next week. I know I will.
This recovery won’t be as sudden as the crisis. But if you are smart in investing, if you follow the best methods, you’ll be part of the recovery. You can come out ahead of this recession. The benefits of investing in real estate right now are real. You can be part of a real change, in your life and for the country.
As you start taking steps towards your new career, I want you to keep something else in mind, too. Tackling things alone can be tough, whether you’re investing in real estate in a recession economy or not. Starting a real estate investing company from scratch is no exception. But, by joining a team that’s seen every kind of market there is, and that knows what it takes to get and stay strong, your chances of getting off to a good start will be better-than-average—in any economy.
The Best Way To Realize the Benefits of Investing in Real Estate
So, are you looking to get started in real estate investing? Or, looking to make your side-gig full-time? Perhaps expand your business now that things are really picking up? Well, it’s possible to do all this. It takes some work. And, it might just be a great opportunity to become an independently owned and operated HomeVestors® franchisee.
I’m a HomeVestors® franchisee. It turned out to be the best thing I’ve ever done for my business. See, as a franchisee, I get a lot of benefits, including:
- Qualified leads delivered directly to me from people looking to sell quickly
- Marketing efforts supercharged by the nationally-known and trusted “We Buy Ugly Houses®” campaign, known everywhere since 1996
- Proprietary financing and evaluation tools
- Tons of great support, including mentorship and training
- A platform for wholesaling to buyers
With all this, I know that my business will weather the coronavirus just fine. HomeVestors has led the real estate investing industry through two recessions—and generally its franchisees have come out ahead each time. The pandemic may bring uncertainties, but we are well-prepared to meet them.
Your contribution to the future is up to you. If you want to take advantage of the benefits of real estate investing with solid support, request information about becoming a franchisee today.