The pandemic has shaken things up for every business in America.
For some companies, it’s been a profitable change (Amazon, Visa, and Microsoft are all thriving). For others, it’s been detrimental. More than 100,000 businesses have closed their doors permanently since the rise of Covid-19.
Real estate investors are far from impervious to the large-sweeping impact of the pandemic.
That doesn’t mean it’s a bad time to invest — actually, it’s a great time to invest — but it does mean that you should pay special attention to the markets where you’re investing and the type of investments that you’re making.
To help, we did a little research on the state of the real estate market and what the best opportunities are right now for investors.
Here’s what we found!
1. Rental Properties
Owning rental properties is probably always going to be a profitable long-term strategy for investing in real estate.
Everyone needs to live somewhere, but a lot of people can’t afford to purchase a home outright — rentals fill the gap.
Still, the pandemic has had a noticeable impact on the rental market in the U.S. Vacation rentals, for instance, have seen higher vacancy rates than normal, property managers and landlords have received 24% fewer rent payments since the onset of the pandemic, and big cities like San Francisco and New York are seeing a decrease in rent prices while small cities like Durham, North Carolina are becoming more costly.
At the end of the day, though, rentals are still a profitable investment. Rentals build long-term worth and wealth in a way that flipping properties can’t quite match.
The pandemic simply means that you should be a bit pickier about the properties you purchase, the tenants you accept, and the markets you operate in.
Ryan Dossey’s advice is to “keep the best and wholesale the rest.”
Which brings us to our next point.
So long as big-money investors are looking for properties to add to their portfolio, wholesaling is going to remain a profitable business model.
The biggest challenge of wholesaling is simply the amount of competition. In that regard, Covid-19 might play a vital role. You see, challenging times have a way of separating committed and disciplined investors from the rest. It’s not unlikely that markets will see wholesalers with undisciplined business fall by the wayside, while those with clear and effective processes will grow their businesses.
Talk about motivation to be one of the best wholesalers in your market, huh?
Wholetailing is similar to wholesaling, but instead of quickly selling to an investor, you fix the property up just enough so that you can list it on the MLS.
To be clear, you do not fix it up to the point where you could list it for its total ARV — the goal is to sell the property on the MLS for what feels like a heavily discounted price.
Imagine, for example, that you purchase a property for $100,000. It has an ARV of $170,000 and it requires about $25,000 in cosmetic repairs. To wholetail, you might spend $5,000 fixing up the property so that you can list it on the MLS and then sell it for $130,000, profiting $25,000.
The benefit is that you can make more money wholetailing deals than wholesaling them. The downside is that they take longer to sell. But if you have the time and patience, then why not increase your profits by wholesaling rather than wholetailing?
It’s at least worth a shot!