Like any other venture, real estate investment is always risky. The market is constantly shifting, and trends tend to affect the value of properties. But that is the reason why several of the wealthiest people in the Philippines made their fortune in real estate. They took a calculated risk.
However, that risk is made even more challenging during the COVID-19 pandemic, when consumers get cautious in spending and industries struggle to perform. Yet, many investors are getting quick to purchase properties now. So, for those willing to put their foot forward and invest in real estate, you are in the right place.
Reasons to Invest in Real Estate
- Affordable market prices – The pandemic undoubtedly led consumers to struggle with budgeting. Thus, developers sought to attract buyers through lower or discounted prices on properties, from house-and-lot to single units. It is a fruitful time to seize the affordable market.
- Continuous passive income – Unlike other investment options, real estate offers long-term passive income. Since shelter is a basic human need, demand for properties remained steady during the pandemic.
- Low interest rates – Given that the pandemic caused an economic recession and affected market activity, banks became considerate to consumers, leading to lower interest rates. With this, loans become cheaper and more flexible to purchase for investors.
- Stability in market value – Real estate has proven, amidst economic bubbles and slowdowns, that it can thrive. Owning a property provides security and tangibility, even if the value shifts. And every season, there is always market interest.
Challenges with Real Estate Investing
Even though real estate is a safe and adaptable market to capitalize on, there can be challenges along the way. And if investors are not mindful of the market performance, it can impact their business and fluctuate their properties’ value. Here are several hurdles that you must take note of:
- Complacency from tenants – Due to the economic fallout, not all tenants can accommodate their rental rates. Evictions and low occupancy are inevitable in the market.
- Market instability – The unstable status of the pandemic can be worrying. This is why investors stick to safer investments.
- Strict deal underwriting – Underwriting has become more rigorous during the pandemic. Given the difficulty in predicting how properties will perform, worst-case scenario underwriting is suitable.
Important Factors Before Investing
Don’t let the challenges of real estate investment hinder you from taking advantage of the market. Consider these five factors before you invest:
- Choose the best location for your properties – The location sets in stone the types of occupants that will flock to your property. Determine the areas that have strong revenue, reputable communities, appealing surroundings, and convenient establishments. Market to demographics with stable ties.
- Expect upfront costs – For investors relying on a mortgage for investments, it can be concerning when lenders mandate 15–20% deposits to compensate for the pandemic. However, if you can acquire the necessary deposit, offer the upfront cost immediately.
- Launch a formidable online presence – More consumers are now found online. Grab their attention by setting up accounts on social media channels, networking apps, and blog sites. Engage them with your financial advice and your property portfolio.
- Map out the maintenance costs – There are numerous costs to consider before you make your first purchase, like monthly amortization, insurance, property tax, and others. Do not forget regular property improvements. Organize a steady financial strategy to accommodate them.
Takeaways
While the COVID-19 pandemic has affected the way we spend, it also prompts us to regard our finances wisely and take advantage of investing in thriving industries. Investing in a steady market like real estate can bring solutions, security, and stability to your income. But always come prepared.