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Wednesday, January 13, 2021

Is Real Estate a provident investment amidst the COVID19 pandemic?

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Crisis doesn’t mean we have to stop saving or investing. If we want to have more emergency funds, the only key is to save more and invest more for the future.

Buying real estate property is considered as one of the most important and provident financial investments one can make. But during this pandemic and economic trouble, that conventional wisdom was thrown into question. Is it still wise to invest in the real estate industry? What lies ahead for the future of the real estate amidst this extraordinary period?

Since the start of the COVID19 infection, global markets went into turmoil but surprisingly, the property market has remained resilient with 35% of Americans still choose the real estate as their top investment. It’s ahead of stocks and bonds at 21% and savings accounts at 17%. It’s the reason why financial experts agreed that this downturn will definitely not hurt real estate in the same way as the 2008 global financial crisis.

Current state of the property market

Financial experts prove that in most historic recessions, the property market has either remained largely resilient or was only impacted across certain real estate sectors. It means that now remains a reasonable time to think about buying a real estate property once cities and states reopen.

In a bid to stimulate global economies, interest rates were slashed. The cost of borrowing has become cheaper and it could make mortgages more affordable for those with adequate finances. These are only some of the reasons why investing in real estate is still a smart move.

Although likely to be sluggish, experts in the field believe that transactions will start rising again in the coming weeks; but as the nature of the coronavirus pandemic remains uncertain one should look into the specifics of the local and national market of the city in which you’re looking to invest.

Wise investment during the pandemic

One great source of a passive income via rental payments and capital growth is a buy-to-let property. For first-time buyers who are unable to buy in their preferred area, it can be an alternative route onto the property ladder.

Places where the labor market is the least damaged has the best investment opportunities. For those in a position to invest, they have a lot of great opportunities. However, nowadays, the global economy and the renter’s market is both on the rocks so be very cautious as some tenants may struggle to make their payments on time.

Commercial real estate poses the biggest risk for investors as its market has fallen into almost 28% because of the pandemic. It will take some time to correct the drop-off and the recovery for sure would be very gradual due to phased reopening of economies.

However, where there are downsides there are also opportunities as there will always be investors who look at the long-term potential of these real estate sectors with strong fundamentals, such as industrial and residential real estate. When it comes to a better source of income and as a portfolio diversifier, investors still prefer the value of direct real estate.

Before embarking on any financial investment like real estate, it’s important to get the foundations right. Finance experts recommend setting aside three months’ salary in cash to help you through a difficult period or emergency, but in the current economic situation, six months’ worth is a safer bet. You need an emergency fund as it gives you peace of mind knowing you have a barrier against the worst financial disasters.

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