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Turnkey Real Estate Investing

4 min read

Find the Best Real Estate Markets to Invest In During a Pandemic

Fri, Jul 24, 2020

wheretoinvest-investmentmarkets-investingduringpandemicBack in March, most of us probably expected pandemic fears to wane after a few weeks. At the most, we thought the summer would bring an end to things and we’d return to business-as-usual. Unfortunately, we have not seen this to be true. Talk of a “new normal” seems more and more like reality. It’s likely that COVID-19 will forever change how society functions!

Despite the changes, we know we can’t live in fear forever. As we do with our investments, we practice healthy risk management — listening to sound advice and recommendations from health-industry professionals. We do what we can as responsible members of society while refusing to live in fear.

Fear will be our biggest obstacle to overcome, not only in relation to the pandemic but in taking chances with our finances and futures during uncertain times. 

We’re in a recession. That alone will scare many off from making big financial moves. We can’t blame anyone for that, especially considering the current unemployment rate and the fact that federal unemployment provisions from the CARES Act are due to expire soon. 

For real estate investors, however, these things don’t mean that opportunities are lost. We just have to be strategic, diligent, and intentional about where and when we invest; now more than ever. If you feel apprehension about investing in real estate, we’re here to help you navigate the ups-and-downs of the current market.

4 Markers of a Real Estate Market Worth Investing In

The indicators that signify a good investment market are unchanging. They may vary depending on the type of investing you intend to do, but for our part, we’re talking about long-term single-family rental properties. That said, the pandemic crisis has brought a few new factors that we must consider when selecting an investment market.

Population Trends

One of the greatest indicators of market health is population growth. In the midst of a pandemic, however, we have to consider population trends a little differently. Population density is a pandemic bugaboo, as closer proximity and volume of people means more positive COVID cases simply because of odds. This has led to a migration from population-dense areas into more suburban and rural areas versus city hubs. While primary markets struggle, secondary and tertiary markets — especially those while a more sprawling square mileage — see more stable, if not growing, populations. This trend is likely to continue. 

Be sure to check out: Secondary Markets for Long-Term Real Estate Investment Success

When looking for an area in which to invest, look at population trends not only from the last few months but the past several years. An upward trajectory means that the market has a level of stability and opportunity that will help keep your rental properties occupied and in-demand.

Millennial Demographics

Millennials are one of the biggest shares of the pool of potential homebuyers. However, between 2018 and 2019, the numbers of millennials who said they’re likely to “always rent” rose from 10.7 percent to 12.3 percent, according to Apartment List.

There are many barriers to homeownership facing millennials and the eldest of Generation Z, who are in their twenties. From the burden of student loans to the unaffordability of housing, they find themselves unable to save for a downpayment. They’re also more transient and value life-long flexibility. As a result, millennials see more benefit in continuing to rent, even if they felt homeownership was a viable option.

For real estate investors, tapping into a population that consistently rents is key!

Unemployment Impact

The unemployment rate is high. In June 2020, some 17.8 million Americans were unemployed. That’s a rate of 11.1 percent, down from April’s all-time high of 14.7 percent. While not currently as high as predicted, the rate is still much higher than it was pre-pandemic. March saw a rate of 4 percent. In just a month, it jumped by ten.

Unemployment has predominantly affected lower-income jobs that were not able to transition into work-from-home roles. Unemployment doesn’t tell the full story, either.  The economic impact has left even those still employed with cut hours and loss of revenue — not to mention losses from business closures, temporary and permanent. The economic market is simply not as active as it was. For our part, unemployment presents a real estate investment risk. 

We’re likely to see a higher burden on the unemployed as federal benefits from the CARES Act expire. Real estate investors, value stability and seek out the markets that still have a relatively low rate of unemployment.

Market Affordability

Combined with other factors, market affordability is a key benchmark for investors to consider. There’s always a tension between supply and demand that impacts affordability. High-demand markets see prices rise — not just of property, but in all areas. Food, utilities, construction, retail...as demand increases, so does the cost. Eventually, that tension snaps and turns residents away from the market. We’re seeing just that in big cities like San Francisco and Los Angeles, where affordability seems to be a foreign concept. As more workers are able to work from home, and thus cut ties with the expensive urban market, out-migration increases.

Investors should, then, focus on more even-tempered markets to maintain the right balance that keeps residents living and working where they are.

Deciding where to invest is an enormous decision. Thankfully, REI Nation has already identified markets ideal for long-term investment. We’ve done our due diligence so that you can invest with confidence.

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Chris Clothier
Written by Chris Clothier

Entrepreneur, writer, speaker, ultra-endurance athlete, husband & father of five beautiful children. Chris puts these natural talents on display every day. As a partner at Memphis Invest, Chris addresses small and large audiences of real estate investors and business professionals nationwide several times each year. Chris is also an active writer, weekly publishing real estate, leadership, and endurance training articles.

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