The COVID-19 pandemic has thrown a wrench into a lot of plans. Whether we had dreams of big 2020 vacations, family reunions, or big financial moves, the state of the world has led us to reconsider more than a few things. The pandemic has taken its toll on our health, our social lives, the economy, and our finances.
We’ve been living in what seems like a giant experiment in trial-and-error for the past six months. Let’s be honest: it’s been scary. Whether you’ve been concerned for sick friends and family or watching the stock market with increasing anxiety, uncertainty is the name of the game.
For real estate investors, 2020 has brought us to pause. We’re re-evaluating, revisiting our strategies, and looking for ways to preserve our wealth and cash flow in the months and years to come. Thankfully, the real estate market has largely rebuffed the consequences of the pandemic. Despite a dip in activity in the first few months, the market, by-and-large, has bounced back tremendously.
Among your choices of investment, real estate remains a solid — if not the best — choice for building and maintaining wealth.
With that said, investing in real estate during a pandemic isn’t necessarily easy — despite encouraging market performance. So for investors, when is the right time to invest in real estate? And where should we focus our attention?
The When of Investing in Real Estate
One of the big questions that would-be investors have is “is now the right time?”
We worry about missing a great window of opportunity or throttling our profits if we miss the mark. The good thing about real estate, however, is that it is and always has moved in a reliable cycle.
( We’ve written about how the market cycle impacts real estate investors in detail. )
The cycle is simple:
- Expansion
- Hyper Supply
- Recession
- Recovery
For the past decade or so, the real estate market has largely been in “expansion mode.” This is because supply has been notoriously tight in markets nationwide. While the length of each stage in the cycle may vary, it always follows the same reliable pattern.
What’s important to remember is that passive, buy-and-hold investors are much less beholden to the cycle than others. They invest in every stage of the cycle rather than trying to time the market. So if you’re asking yourself when to invest, here’s your answer: now!
There may be more “ideal” times to invest, but if you keep abreast of the factors driving your investment markets, you can make more informed investment decisions. It’s the individual markets that matter for the investor, rather than the overarching real estate cycle...which brings us to the next big question...where to invest!
The Where of Investing in Real Estate
The question of where to invest in real estate, for the passive investor, is a bit more complex. Mistakenly, many investors believe that the biggest, hottest markets are where investors should target their efforts.
This isn’t necessarily true for a variety of reasons. Not only are we seeing a pandemic-induced migration from big cities to smaller markets, but smaller secondary and tertiary markets tend to be more stable and predictable. That’s good news for investors! Hot markets can be unaffordable and their profitability for investors may have diminishing returns over time.
Where to invest is a matter of long-term stability more than anything.
For our part, we’ve targeted secondary and tertiary markets exclusively. REI Nation began in Memphis and has, over time, expanded into multiple markets in the South and Midwest. Few of these markets would be called “hot,” but they have the track record and trends to back up their selection.
Now that preferences are shifting in favor of less dense, more suburban markets and areas, we’re even more convinced that we picked well.
Be sure to check out: Secondary Markets for Long-Term Real Estate Investment Success
When considering where you want to invest, consider what you want and how you want to invest. The market that a buy-and-hold investor will select is different from the one a flipper will want. As a passive investor, your attention should be on historical trends and market performance along with the shifting priorities of your residents.
During the pandemic — now more than ever — it is critical that investors fall back on stable and proven markets.
Start investing in tried-and-true real estate markets with REI Nation.
