Investing in residential real estate – is it still profitable?
How to invest money wisely? This question is circling in the minds of many people. One of the seriously considered options is investment in residential real estate. However, is it profitable? Hasn’t the market by the recent events related to the coronavirus pandemic changed so much that our investment plan may turn out to be a missed idea? Let’s check!
Investment in real estate – why is it worth it?
It is definitely worth considering investing in real estate, because the advantages are many. On the one hand, we have physical assets whose value is tangible. Unlike money held in deposits, the value of which rises in one period and falls in another, housing is always at a premium. This certainly has a calming effect in periods of uncertainty.
Secondly, and also worth mentioning, real estate is an excellent protection of capital against the effects of inflation, which we are now facing. Last but not least, real estate provides access to a cyclical and steady income. By investing in them, we also gain access to fairly cheap financing in the form of a mortgage.
Coronavirus pandemic vs. residential rentals
All right, someone will say, all these strengths convince one to invest in real estate, but in the era of successive waves of pandemics, is it wise? It’s impossible to answer this question unequivocally, because although in the case of apartments, questions of profitability should be looked at from a long-term perspective, the coronavirus crisis has taken a heavy toll on the rental real estate market, both when it comes to the short and long-term.
This was felt especially by apartment owners in the centers of large cities, who before the outbreak of the pandemic could not complain about tourist traffic. During the crisis, however, everything came to a standstill. Many of them, in order to cover fixed costs, such as rent, mortgage, etc., had to change their business profile, renting out properties for a longer period of time. With that said, there are sometimes problems here as well, especially for those renting rooms to students, as the situation has changed dramatically with the need to study remotely. Nevertheless, they are better off anyway, since it’s easier to rent a room than an entire apartment in a luxury neighborhood, especially since many Ukrainian workers are looking for their temporary corner to live in.
Profitable or not?
Despite the problems and lesser profitability of such an investment, it is worth considering, however, choosing a property that will always be attractive to renters. What kind is it? By far the best are standard apartments, those in which it is always easy to find customers, no matter what the market situation is. Such properties are also easier to sell. So it is worth investing in studios and two-room apartments, preferably with a separate kitchen. The larger the apartment and located in a more luxurious neighborhood, the greater the problem we may have to rent or sell such an apartment, especially during periods of uncertainty.
Paradoxically, now is a good time to invest in real estate, because through the crisis there are many market opportunities. Some owners are complaining about the difficult financial situation, so they are forced to sell their properties quickly. It is also worth noting that low interest rates encourage people to take out mortgages, because they are easier to repay. On the other hand, it should be remembered that current loans are more expensive than before the outbreak of the pandemic.
As it happens with financial issues, there are never any easy answers with a black and white tint. All because the reality is much more complex and complicated. Many issues can be illuminated by real estate experts.
