In the face of the COVID-19 pandemic, a lot of industries are struggling under the weight of rapid change and economic hardship. For real estate investors, the big question seems to be: Amid constantly shifting safety recommendations and social distancing requirements, are investment properties still a viable way to turn a profit?
Normally, spring and summer are the hottest months for real estate markets. In fact, May and June are frequently thought to be the best times to sell.
As we head into Summer 2020, continuing coronavirus cautions economic trends suggest that May and June are likely to be anything but normal. However, that doesn’t necessarily mean that you’re less likely to successfully flip and sell a house in the current market.
A National Decline in Home Sales
It would be remiss for real estate investors to ignore what they’re up against right now. Most financial experts agree that the overall decline of our economy since mid-March will inevitably mean a similar decline in home sales this summer. Recent information from the U.S. Department of Commerce foreshadows the negative impact Covid-19 is likely to have on the housing sector: “After reaching an 11-year high in February of this year, U.S. mortgage applications plummeted 29.4% in the week ending March 20.”
Fix-And-Flip Properties Might Still Be Locally Profitable
While the housing market is expected to dip nationally, local markets are seeing dramatically different trends. Per usual, the ultimate factor in a property’s sellability will be location, location, location. Depending on the property’s geographic location, the local market may not be impacted as dramatically as one might assume.
Some data suggests that flipped houses might fare better in the current market than new properties—new houses with high price tags are likely to sit longer, whereas a competitively priced flipped house can be extremely appealing to buyers.
In addition, houses that do go on the market may have an advantage based on scarcity. Homeowners nationwide are being cautioned against listing their houses at the moment due to the plummeting market—which might make it possible, in some areas, for investment properties to sell at higher profit margins than they typically would.
This is the current case in Seattle, Washington, where homes are currently selling at an average of 0.6% above asking price thanks to current supply and demand in the local housing market.
How Can You Successfully Profit From Investment Properties in This Market?
The key to real estate investment success in 2020 will be your ability to do your homework. Research your local market to figure out what’s selling, why particular property types are more popular, and identify trendlines. Pay attention to quality workmanship. Invest in amenities that homebuyers in your area are known to love, and leave yourself enough margin to price your properties competitively.
It’s also important to think about how potential buyers are likely to encounter your property right now. Until social distancing becomes unnecessary, smart investors will take into consideration the importance of virtual presence. You may want to prioritize creating a high-quality virtual tour experience over a physical open house, and you should work with your real estate agent to ensure that your listing is easily searchable on all major real estate sites.
When in doubt, try to think like a current buyer: Ask yourself what actions you would take and what qualities you would value if you were trying to buy a home in the current climate, and make your investment decisions accordingly.