When the market is fluctuating—as it has been as a result of the COVID-19 pandemic—the question of “should I sell my investment property now” becomes even more pertinent and nerve-wracking. But there are a lot of good indicators that suggest making a move now might be a good idea. Plus, if you’ve made the right investment, you may be able to benefit whether you choose to sell now or wait.
It’s all about understanding the market and your property’s position in it. Each case is different. Ultimately, it’s up to you to decide if selling now or waiting is the best decision for your business.
Understanding How COVID-19 Created a Seller’s Market
At the beginning of the pandemic, as the economy moved toward a recession, people in nearly every industry held their breath. In real estate, though, we knew that you could invest in a recession with less uncertainty. Troubling economic times usually mean people needing to sell their houses fast, for cash. We were prepared to help distressed homeowners sell when they needed, which would create quality leads for real estate investors.
Then, mortgage forbearance and economic stimulus helped us avoid a foreclosure crisis. There was an uptick, but nothing like we saw in 2008-2009. In fact, there were 30% fewer home sales between January and June of 2020. But that didn’t mean it was a bad time for real estate. In fact, as a seller, this was great news.
Initial uncertainty meant that people were reluctant to sell, and the nature of the pandemic put a serious crimp in building. This led to a 60% decrease in the number of houses on the market between February and May of 2020. But the decrease in demand wasn’t matched by a decrease in supply. While there were obvious regional variations, the average home price climbed at the beginning. There were fewer houses and barely-changing demand.
By September 2020, the market showed signs of recovery as the number of total homes sold and the average selling price reached record highs. More people wanted to move, especially to less crowded areas. This was especially true of the professional class who could work remotely. Suddenly there was a lot more supply and demand increased even more sharply.
But supply and demand aren’t the only things to consider about a seller’s market.
Why Interest Rates Should Interest You
While uncertainty may still linger for a while, it hasn’t stopped people from wanting to buy a house. This is partly the result of direct action by the government that provided economic stimulus payments and other forms of financial assistance. This is even a stronger possibility due to historically low interest rates.
Interest rates were lowered in order to encourage more buying, and it worked. Currently, the 30-year fixed-rate is 2.875%. For comparison, in May of 2019, the rate was 4.07%, which was still extremely low. In May of 2008, and it was over 6%. In 1981, the yearly average was over 16%, hitting 18% in some months. So, under 3% is unprecedented.
It’s not free money on a loan. But it’s as close to zero interest on a mortgage we’re likely to see. And that means there could be a lot more people with the opportunity to buy a home.
Now that you understand the current market conditions, let’s talk about what you may want to do with your investment property.
Investors Ask: Should I Sell My Investment Property Now?
Weigh your options. Once the market settles down, selling prices will likely increase even more. And, with rental rates continuing to rise across the nation, it makes sense to continue to hold on to your property, especially if it’s generating passive income. After all, this is a recession-proof business—there’s no need to rush into anything.
If you did decide to sell, the market is hot right now and you might be able to sell at a good price.
When determining if you should sell your investment property or hold on to it, consider the basics:
- Is your property in a neighborhood that is (or is becoming) popular to live in?
- Are you still earning passive income from rentals?
- Would you be happier/have more time/more capital to invest if you sold now?
These aren’t all either/or questions. And, if you made the right investment, you’re likely in a good position if you decide to sell now or wait. Because here’s a little secret, one I’ve been hinting at: the overall “market” doesn’t matter if your particular property is fundamentally sound. The market could be super cold overall, but that doesn’t mean your property is.
If your investment property is solid, the average market doesn’t matter. You don’t have to panic about holding or waiting until just the right moment. All that matters is if what you choose to do is the right decision for you.
The Best Way to Make Sure You Have a Solid Investment Property
Getting a solid investment property isn’t easy, but it’s not impossible. I found locating solid investment properties to be much easier when I became an independently owned and operated HomeVestors® franchise. I was able to take advantage of their lead-generating and proprietary valuation tools.
HomeVestors® has the nationally-known We Buy Ugly Houses® marketing campaign. So, when people need to sell fast, they contact HomeVestors. And as an independently owned and operated franchise, I’m connected to motivated sellers who contact us. I can determine if this is a good lead or not, and if it will be a solid investment property whether I sell it or hold on to it. The proprietary valuation tools help me make that judgment.
Having a solid property means I am able to make money on my investment and sell when I’m ready. That’s the kind of freedom that makes me stress less about the market and enjoy real estate investing.
If you’re considering buying or selling an investment property, request information about becoming a franchisee today.
Each franchise office is independently owned and operated.
HomeVestors of America® is the nation’s only real estate investing franchise, providing business opportunities to real estate and investment professionals across the nation.