Covid-19 has ambushed economies all over the world, with leaders and businesses desperately trying to find a healthy balance between protecting people and protecting the economy. So many industries have been left in an unpredictable state, including the real estate market. Let’s have a look at 3 important things you should know before taking the leap and investing in real estate.
1. Compared To Other Industries, Real Estate Is a Relatively Safe Investment
Historically, real estate has been a reliable investment. Whilst the pandemic has created a sense of instability, residential real estate continues to function in a relatively normal manner. In the worst case scenario that the value of the property you invest in depreciates, you still have a physical asset to your name. If you’re looking to get into commercial property, that’s a whole other story. The market has been shaken dramatically with people working from home and e-commerce developing exponentially, leaving many commercial real estate owners in a difficult position. Of course there are exceptions, for example companies who have benefitted from the pandemic as they were hit with a huge demand for their products. Many of these companies are now looking for industrial space to stabilise their supply chain. This would be an option for investment and you can get great value for money through commercial property auctions, yet overall, it seems residential real estate is the safest investment in the industry.
2. Select The Best Possible Location
When investing in a property, whether that be to renovate and sell or to rent out, choosing a location with sustainable demand is essential in order to make a reasonable return on your investment. With the financial uncertainty that comes with a pandemic of this scale, people are looking for the best possible value for money and they want to be sure that if they are taking a substantial financial risk, it will fulfil all of their needs. If you’re looking at investing in a flat, the younger generation are looking for amenities when they are renting, so there are a few things you should look out for. Local bars and restaurants, gyms and proximity to public transport, to name a few. If you’re looking for a suburban property with the hopes of targeting a family, aim for areas close to large parks, countryside public footpaths, good schools and supermarkets. Consider who you are wanting to target and what they will be looking for before making the important decision of where to invest.
3. Prepare For Substantial Upfront Costs
For the first time in a long time, many mortgage lenders are demanding 15-20% deposits as a result of Covid-19. If you are a cash buyer, this won’t be a concern, but if you are relying on taking out a mortgage for your investment, then this could be important. The economic fallout that has loomed as a result of the pandemic led low-deposit mortgage deals to crumble, leaving people who had saved a 10% deposit extremely disgruntled. The current financial uncertainty in the UK also led lenders to be even more selective on who they offer mortgages to. If you are in a position to offer a high deposit straight away, then you will be in a strong position. These substantial upfront costs could be a deal breaker for some investors, so this is something to consider before starting the process, and definitely something to research in depth.
To summarise, residential real estate seems to be the safest investment at the minute. With the financial difficulties facing many potential buyers and renters, make sure you select a property in a great location that people can’t refuse. Finally, if you’re relying on a mortgage for your investment, consider the substantial upfront costs involved.