The COVID-19 pandemic has upended many industries, and real estate is no exception. But for some investors, the pandemic has presented a unique opportunity to capitalize on the changing market. Nathan Turner is one such investor. After being laid off during the pandemic, he used "rental arbitrage" to set up his first Airbnb unit with just $6400. By renting a larger apartment and subleasing it on Airbnb, he was able to make a profit and start building his real estate investment portfolio.
Turner's story is just one example of how the pandemic has shifted the real estate market. But while some investors are seeing success, others are struggling. Commercial real estate, in particular, has been a problem for banks. As the pandemic has forced more businesses to shift to remote work, demand for office space has declined. This has left banks with a surplus of commercial real estate loans that they may struggle to collect on.
But while commercial real estate may be a problem for banks, it can also be a solution. Some investors are taking advantage of the market by buying up distressed properties at a discount. With the right strategy, these properties can be turned into profitable investments.
Of course, investing in real estate is not without its risks. The real estate market took a hard hit after interest rates rose at the fastest pace since the 1980s. Between 2021 and 2022, mortgage rates are expected to increase, which could make it more difficult for investors to secure financing. Waiting until the housing market bounces back isn't an option for some investors, who need to make money now.
Despite the challenges, some investors are still finding success in the real estate market. According to Redfin, home purchases by investors fell 48.6% in the first quarter from a year ago, the largest annual decline on record. However, this may be due in part to the pandemic, as investors may have been more hesitant to make large purchases during a time of economic uncertainty.
For those who are still interested in real estate investing, there are a few key things to keep in mind. The adage "Location, location, location" still rings true. When investing, check area drivers like job and population growth to find the best opportunities. Investors should also consider their long-term goals and risk tolerance. Real estate can be a great way to build wealth, but it's important to have a plan in place and to be prepared for any potential setbacks.
Investors frequently compare real estate and stock investing in terms of their returns. According to a Gallup poll published in May, 35% of Americans believe real estate is the best long-term investment, compared to 21% who prefer stocks. However, it's important to remember that both real estate and stocks come with their own risks and rewards. Investors should do their research and consult with a financial advisor before making any investment decisions.
For those who are interested in investing in real estate, there are a few options to consider. One popular option is to invest in real estate investment trusts (REITs). Top-performing REITs in May include Peakstone Realty Trust, Apartment Investment & Management Co., and UMH Properties, Inc. These companies own and manage properties and pay out dividends to investors.
Overall, investing in real estate can be a smart move in a post-pandemic world. While the market may be shifting, there are still opportunities for savvy investors to make a profit. Whether you're interested in rental arbitrage, commercial real estate, or REITs, it's important to do your research and have a solid plan in place. With the right strategy, real estate can be a valuable addition to any investment portfolio.
