Investing in real estate during a recession has its pros and cons. While conventional wisdom would tell you that investing in real estate “never goes out of style”, staying aware of the potential pitfalls will make you a more savvy investor.
Interest Rates for Investors
You have probably seen that interest rates are at record lows however buyer beware. The purchase of an investment property may mean more scrutiny by banks. Given the uncertainty of the job market, those who are getting those great rates have stellar credit and collateral. While you may have a great pay stub to show a banker today, this is no guarantee to the mortgage industry that you will have that same level of income in two or four weeks. Therefore, those mortgage rates you see are reserved for those that can provide evidence that you can cover the payments in the future.
Rent Forbearance for Landlords
With the government giving the green light for renters to not pay their rent, as a landlord, this leaves you entirely responsible for paying the mortgage. Before you invest, determine your ability to manage this type of payment not only now but in the future, should there be another wave of stay-at-home orders.
Concerns for Flippers
If your goal is to buy and flip a home, consider the following. What will be the Ripple Effect? Be prepared for a backlog of services when this crisis is over. Currently, in many states, homes are not undergoing home inspections or appraisals. This is creating a problem for those currently wanting to sell and, in time, will have longer term ramifications. Another concern is access to materials. Although much of the country is focused on getting essential food items to market, home building materials have taken a back burner.
The big question everyone has at this time is… Will the buyers, or renters, be there at the end of this crisis? The answer is that there is every indication that the government is doing everything possible to ensure that they will be. The question is can you weather the storm?