Invest in real estate during a pandemic? Are you crazy? Or Maybe Not
Should you invest in real estate during pandemic?
Well, that is a reasonable question. Why would anyone want to invest in real estate when markets are so volatile and there is economic uncertainty. It is terrible that many people have lost jobs and suffered heavy losses. But, recessions create opportunities. And when you are trying to find opportunities in recession, you are contributing to economic recovery. You can contribute to recovery in all the types of investment: stock, real estate, product development, etc. Thus it is not crazy to invest during a pandemic.
Contribute to recovery
When you invest, you contribute to recovery. You create jobs, you infuse capital into the market, you are a part of recovering economy rather that the ones just complaining about it. Unfortunately, lot of people just on pile of cash during uncertain times and don’t realize it until its too late. Even though it is scary during recession times, there is a silver lining. For newbie investors, recessions can open doors of opportunities.
Identify your investments
If you have extra liquidity, don’t just sit on it. You are missing lot of opportunities. You can find undervalued deals that you would normally do not take due to high rates. Don’t miss a chance to build momentum. When market starts to recover, you will be already established.
But before you jump from your seat start to invest during a pandemic, study the market. Read the price-per-square-foot declines. Look at the average days-on-market of homes for sale. This data will tell you far more than any screaming headline.
What risks should you be wary of
Of course there are certain risks involved since it is recession. But that doesn’t mean you should not invest. You should take into consideration, following points
- How long the recession, shut down will continue?
- How long will the large portion of population remain unemployed?
- How long recovery will take?
- Will there be second/third wave of pandemic?
Few Do’s and Don’ts
Don’t hesitate to invest. If you miss this opportunity, you will miss out on massive, opportunity-of-a-lifetime recovery gains.
Do thoroughly analyze any new investment that you’re eyeing. Run a variety of “what if” scenarios on a spreadsheet, crunching the numbers with different assumptions.
Don’t over-leverage. You don’t need to borrow every penny you qualify to receive.
Do maintain strong cash reserves.