A running theme for 2020 has been uncertainty. An already strange year was thrown into even greater confusion by the COVID-19 pandemic and subsequent lockdowns, economic challenges, and spikes. Guessing what’s going to happen next is a mug’s game.
Despite everything that’s happened, there is still hope for real estate investing during COVID-19. Some markets have been fine. Some jobs have been left untouched. Everything has changed, but within those changes, there are some certainties. And one of those is that investing in real estate during COVID-19 still makes sense.
Leading HomeVestors® franchise since 2009, I have seen real estate investors across the country thrive during tough times. This period is different from the 2008 housing bubble crash. But there are opportunities now if you are smart.
To achieve your real estate investing goals this year, you’ll need a few things: an understanding of the market, a plan, and the tools and networks that are best for these times. When things are uncertain, it is good to have something you can depend on.
How COVID-19 Has Impacted the Real Estate Market
While I’ve said that there is still stability in the real estate market, that doesn’t mean it was wholly unaffected by the pandemic. It was affected, just as everything in the world was impacted by the overlapping ramifications of the virus. But what is interesting for the aspiring real estate investor is that many of the ramifications are positive for the investor.
It starts with the most basic element of real estate investing: supply and demand.
Inventory and the Pandemic
The year began with some concerns in the real estate market. Inventory was getting tighter than it had been in years. There just weren’t enough properties out there, especially compared with demand. Then the pandemic hit, and that didn’t do anything to help on the inventory side. It was still extremely tight. In fact, if anything, it continued to get worse.
It is estimated that a balanced market needs a six-month supply of homes. After the World Health Organization declared COVID-19 to be a pandemic, we saw a slight increase in the monthly supply of houses in April but that drastically decreased in the following summer months. At the end of summer 2020, in August, the monthly supply of houses was quite tight.
Now, the supply is slowly beginning to rise but still lower than the previous year.
|Month||Monthly Supply of Houses in the U.S. (2019)||Monthly Supply of Houses in the U.S. (2020)|
There were a lot of reasons for the inventory problem pre-pandemic, but the pandemic brought up unique circumstances that exacerbated them. These included:
- the concern about having strangers in their home
- the worry regarding the logistics of moving
- people not wanting to leave their single-family homes
All these circumstances make sense but they also create opportunities. And that’s because of a fundamental truth about the pandemic, which we’ll bold just so you remember:
Supply may have decreased but demand keeps getting higher.
Experts expect demand to continue to rise. There are a lot of reasons why that is true. And those all have to do with the dynamics of the pandemic.
Why Demand Keeps Rising During the Pandemic
We talk a lot about parallels with the 2008 crash, which showed that you can come out ahead investing during a recession. But of course, this isn’t just like 2008-2009. That was about something unhealthy in our economy. This is about people’s literal health.
Perhaps unsurprisingly, that has had a positive impact on demand. Here’s why:
People want single-family homes.
If you live in an apartment, a townhouse complex, a condo, or anywhere else with a lot of people living in an enclosed space, your life has been different. You’ve probably avoided common areas. The exercise room makes you nervous. Doing laundry in a community-shared facility is even more of a chore. Even getting mail demands a mask.
All of these precautions are logical, but they also remind people that having a single-family home means a lot of good things: security, privacy, personal space.
The pandemic has reminded people of the value of space and the importance of a single-family home. That’s why demand keeps rising. That is also why it is thought that first-time buyers are going to keep increasing. So, real estate investing during COVID-19 makes sense.
|Note: Single-family homes aren’t just for buyers. People who can’t afford to buy will be looking to rent homes, so real estate investors can also earn passive income by buying rental houses.|
But, you might be asking: “What good does demand do if there is no supply?” Well, that’s where the smart investor can find some opportunity.
More Distressed Houses Means More Quick Inventory
One sad reality of the time is that while there aren’t a ton of people looking to sell their houses, there will be people who, for a number of reasons, find that doing so is their best option. They may have lost a job. They may have to consolidate funds. Or, they may have inherited a house that they can’t afford or don’t want.
These people will be looking to sell quickly, for cash.
Right now, there have been government programs that have postponed foreclosure. But these are ending; payments were postponed, not forgiven. This creates a great opportunity for someone who has a way of accessing these sellers. Because they are going to be looking to sell fast. At HomeVestors, franchisees are already seeing an uptick in opportunities to buy.
|Note: Distressed houses bought by real estate investors might be more appealing to buyers during the pandemic. After all, you know the investor is working in the house, but not living there. The new buyer will be the first person to live there after the rehab is completed. It’s a peace of mind issue.|
Investors That Can Reach Sellers Have the Edge
In the old days of real estate investing, people would go door-to-door in neighborhoods and see if people were looking to sell. They’d knock on doors and make offers. Even before the pandemic, that method was seen as ineffective. Now, who is going to open the door?
So the way that you find leads has changed, a lot. You want to make sure that someone is comfortable selling even without meeting them face-to-face. That means a few things:
- Sellers have to know who to call as soon as they are facing foreclosure or make a decision they want to sell.. They don’t have time to search around.
- Sellers may want to be able to be reached virtually and have the process handled remotely.
- Sellers need to know they can trust the buyer.
The first point above can be answered through marketing. Chances are they aren’t going to want to pay for a real estate agent. So they’ll sell to someone they have heard of, and who they think can help them quickly.
|Note: Be sure to embrace technology. From home tours to signing virtual documents, giving people safer options is a way to build trust. Understand how to buy and sell real estate virtually for real results.|
They’ll go for a name they can trust. After all, this is a time of uncertainty for everyone. For them, it is a time of stress and multiplying challenges. They want compassion and expertise. And that’s something that can be built into your real estate investing approach.
Real Estate Investing Is a Lessons-Learned Business
Anytime things change quickly there are people trying to take advantage of the circumstances. You can do that in a couple of ways. One is to try something new; one is to do something tried-and-true.
New ideas are always welcome. Flexibility is important. But, by definition, they are uncertain. You don’t know how something that has never been tried before is going to work. Tried-and-true ideas are also great, but of course, what works in one economy doesn’t necessarily work during different times.
For a true recession-proof business you want something that has been proven to work but can adjust to the times. That’s one of the great things about real estate investing. In my experience, you can take lessons learned from previous recessions and adjust them to what is happening now. You have decades of experience to draw from.
It is also this “lessons-learned” mentality that encouraged us to develop a process for coaching HomeVestors® franchisees. If you are able to access a nationwide network of experienced real estate investors, you can tap into that collective expertise. Real estate investing leaders know how to adjust, how to be safe, and how to understand the market. And that’s the best way to get through uncertain times.
How to Make Sense of Real Estate Investing During COVID-19
Nothing in real estate investing is a given, of course. There are always a lot of variables that introduce risk. Even though this is a good market for investing in distressed houses, you still want to find ways to minimize that risk. From where I stand, it’s by becoming a HomeVestors® franchisee that you can do just that.
As a franchisee, you are the beneficiary of a national marketing campaign—“We Buy Ugly Houses®”—that people have trusted for over 20 years. In this time, when financial outlooks can change so quickly, homeowners will turn to you to sell. And you’ll obtain that lead—one that is qualified.
By being in this network, you are also plugged into the kind of leaders who are finding safe ways to buy and sell. You will learn how to work with people to develop the best ways to remain safe while conducting business virtually. You will work with people who, like me, know how to get through tough times.
That’s how we get through the pandemic, and you can make sense of the market. If you want to reduce uncertainty, request information about becoming a franchisee today.
Each franchise office is independently owned and operated.
David Hicks is the President and CEO of HomeVestors of America. A business veteran, he joined the company in 2005 as director of franchise systems and developed a process for coaching franchisees.