Real Estate Investment in 2020

Posted On Wednesday, 21 October 2020 22:05

Navigating real estate investment has always been challenging. The ripple effect on the market of anything from rising interest rates and currency fluctuations to political missteps and trade wars mean it has always been risky business. That has only been amplified in 2020 by the significant uncertainty that the coronavirus pandemic has brought with it.

If you were to compare odds a year ago on the likelihood of a global pandemic being the reason for worldwide economic slowdown in 2020, chances are they would have been pretty low. And while the disruption to financial markets has been far and wide, it doesn’t necessarily mean that property investors have to close up shop. 

While staying out of the market may be a valid option for many, for those that have weathered previous real estate storms – for example – during the 2008 recession, it’s worth looking at the best principles on which to operate right now when the future isn’t so certain.

Patience

Property inventory will inevitably and unfortunately increase given the big spikes in unemployment that we are likely to see as a direct result of the coronavirus crisis. For investors it’s worthwhile exercising patience and not rushing into a new deal. Where once there were few, it’s likely they’ll be lots of profitable investment opportunities available in the coming months, but it would be prudent for any investor to analyse the properties and find the ones with large margins that can withstand a possible hit in resale value.

Investment Area

Ensuring the property is in proven investment area. Things to take into consideration include location and what industries and employers there are in the local vicinity. For example, areas with government buildings or large employers that are more likely to withstand economic fluctuations will provide your investment with insulation and protection. Areas with large developments taking place will offer your investment more opportunity. Both are likely to provide a more stable market and buyer pool during and after the crisis. Start by looking at property types and areas that have had the fewest number of days on the market too and use companies that are able to provide data on buying and selling trends in a specific area.

Emerging technology

Minimise risk by using blockchain. The purpose of the online distributed ledger technology is to record and manage transactions, improving transparency around transactional processes with smart contracts and remove the risk of human error and fraudulent activity by making it extremely difficult to forge records. It also has the capacity to manage the swift exchange of data to multiple parties directly, replacing an information exchange that previously required personal time and the need to attend a fixed location.

This technology could help assist with a mortgage transaction or tenancy agreements where multiple signatures are required, only releasing funds when all parties have agreed. This in time could reduce the need for intermediary figures, such as lawyers, to validate a transaction.

Analysis

Always conduct thorough due diligence and ensure significant property analysis is the foundation of your investment strategy. Look for price growth, figure out what your exit strategy is, analyse all of the risk factors and contemplate a management strategy. You’ll want to mitigate excessive risk right now but crisis or not, this should be part of every investor’s strategy.

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