The COVID-19 pandemic has affected virtually all industries operating in the economy. Many people have struggled with the payment of their monthly rent, some of them not being able to pay at all or in full.
This simply means the landlords’ income has been dwindling, and that means they would have to struggle with servicing their mortgage. Real estate investors who are keen on wholesaling and flipping properties can benefit from this.
The pandemic has many people rethinking the kind of residential lifestyles they want for themselves and their families.
With the social distancing restrictions, for instance, apartment living in densely populated areas is becoming less popular because it increases the risk of coming into contact with people who are infected by the novel coronavirus.
Since people cannot do without a home, the focus has shifted to single-family homes where there are more space and privacy for the resident. Investing in single-family homes in suburbs not so far away from the major cities has proven to be one of the smartest real estate investment options at the moment.
Residents can quench their thirst for social distancing while still allowing them to access city services when they need them.
Most of the traditional real estate strategies are becoming less popular among investors. The major changes in the industry call for a paradigm shift in the way people do things.
What Are the Industry Leaders Doing?
All companies, both public and private, are faced with a situation where they have to make very tough business trade-offs.
During a crisis such as the COVID-19 pandemic, real estate companies have to navigate through the economy concerning their employees, tenants, and the end-users of space.
One would ask what should form the basis of such tough decisions given that the long-term effects of the coronavirus are difficult to predict and quantify. The short-term consequences, however, are evident.
This is what leaders in the industry use to make vital corporate decisions.
Before the dawn of the COVID-19 pandemic, savvy investors have been working on various smart ways of investing in real estate to maximize their returns and reduce their risks.
These strategies include investing in various asset classes to diversify their portfolio, focusing on tenant experience, and exploiting the digital space.
These strategies make much more sense during the pandemic to a point where those who haven’t adopted them yet will need to do so soon or risk being left behind.
For instance, while just a few companies embraced digital marketing and the use of advanced analytics pre-COVID, these strategies can help with property valuation, property management, tenant attraction, and commercial lease negotiations.
It has also become necessary for investors, particularly landlords and property managers, to incorporate health and safety practices and tips in their undertakings.
Making Money from Home with Real Estate
When it comes to investing in real estate, many people picture themselves having to visit their investment properties time and again, physically following up on tenants for them to pay their rental dues, and making frequent visits to the bank.
With the wake of the coronavirus pandemic, this is becoming increasingly difficult. It is becoming a norm for people to work from home and limit their movement with the introduction of the social distancing concept.
The real estate industry still offers you a lot of opportunities to make money without having to leave the comfort of your home. Here are some of the five best ways you can make money from the real estate from the comfort and safety of your home.
1. Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are some of the most known methods of earning passive income from real estate.
They present a viable way of making money from real estate without having to engage directly or doing physical work.
Through RETs, one can invest in real estate without physically owning the property.
A REIT is a publicly or privately held company that owns and finances income-generating properties such as offices, apartments, retail spaces, etc.
As an investor, you typically do not own the property when you invest in a REIT; you own shares within the REIT. REITs pay high dividends to investors. You only need to buy shares in the real estate company.
The beauty of REITs is that you do not have to be a veteran real estate investor for you to invest with them and earn your passive income. Even beginner real estate investors can invest in a REIT and receive dividends from their income.
REITs are an ideal investment option for investors who are seeking regular income without being able or being interested in engaging in the daily running of real property.
REITs allow investors to invest in non-residential properties such as multi-family homes that are generally impossible to purchase directly by the average investor.
These are the benefits of REITs that can be explored during a crisis:
- REITs generally provide a stable stream of income through varying market conditions, such as those expected during a crisis. The dividend yields are stable and quite substantial.
- Shares of publicly-traded REITs can be traded on the stock exchange. This promotes liquidity.
- There is a high level of transparency due to the oversight provided on REITs. The performance and general outlook of listed REITs are monitored by the financial media, auditors, and analysts. This is especially vital if you have to work from home.
- REITs offer long-term returns and performance. Since we do not know how long the pandemic may last, or its effects on the market thereof, investors need to think long-term as opposed to short-term.
You can research and follow the goings-on in the real estate market on your computer or smartphone to buy and sell shares in a REIT and earn substantial income from it.
2. Real Estate Crowdfunding
Real estate crowdfunding is a platform where owners of real estate raise money for investment in real property from a pool of investors who contribute money towards accomplishing a real estate project.
It typically allows small investors to invest in big real estate projects. Making money from real was left for wealthy individuals with strong financial muscles.
With the introduction of real estate crowdfunding, this is no longer the case. Small investors can decide to pool their resources together to invest in real estate.
While you are locked down in your home, you can team up with like-minded investors and pool funds together to invest in commercial real estate.
Sometimes known as peer-to-peer financing, money is raised through online crowdfunding sites or platforms where property developers are connected to investors.
These are some of the beauties of engaging in real estate crowdfunding during the COVID-19 pandemic:
- It offers a passive real estate investment strategy devoid of managerial responsibilities where you have to carry out tenant-screening in the case of rental property, conduct repair, and maintenance, etc. The sponsor will do all that on your behalf.
- You can diversify your investment over many asset classes, possibly even in different countries, with just a small amount of capital. Diversification is good news for the real estate investor during a crisis that brings with it great uncertainties.
- Crowdfunds offer transparency since investors are fully aware of where their money will be invested from the onset. Even without engaging directly in the managerial aspects of the property, you can be sure your money is bearing fruit.
3. House Hacking
How does the idea of being a stay-at-home landlord sound? House hacking is the process of renting out part of your primary residence. It allows you to become a landlord and earn rental income without having to acquire a rental property.
It saves you the agony of having to service a mortgage, especially if you are a beginner real estate investor.
This strategy would work best if you live in a multi-family home, say a duplex or triplex. This way you can live in one unit as you rent out the extra unit(s).
During a crisis such as a coronavirus pandemic, you will be able to manage the rental units as you stay at home because the units are just a stone-throw away, literally. Besides, since the cost of living has become high, you can use the income to settle your living expenses.
4. Short-Term Rentals with Airbnb
The COVID-19 pandemic has seen hotel bookings decrease drastically, airlines have their flights slashed, and cruise lines stop sailing across the globe.
Airbnb has also received a major blow since vacation rentals became less popular. On the contrary, those seeking to shield themselves from coronavirus hotspots still present a business opportunity that can be grabbed by Airbnb hosts.
Henry Harteveldt who is a travel industry analyst at Atmosphere Research Group indicates that these are alternative forms of financial lifelines for hosts who have experienced their other reservations disappear.
In retrospect, Airbnb created an opportunity for homeowners and investors to invest in short-term rentals by introducing a program called
Airbnb Open Homes which offers accommodation for first responders who are seeking a place to stay during an emergency. This is a great opportunity that can be exploited by investors.
Many people who are offering essential services such as healthcare are looking for a place to stay that is relatively closer to their places of work or self-quarantine as they interact closely with COVID-19 patients.
5. Real Estate Syndication
Real estate syndication is simply a partnership between many real estate investors. They pool capital and resources together to acquire real property that they would have otherwise not been able to purchase if they were to do so individually.
Syndications, therefore, allow the investor to tap into investment opportunities that are beyond their capacity.
There are two parties in real estate syndication; the sponsor who is solely responsible for acquiring and managing the property, and the investor who provides the funds.
To earn from real estate at home using this method, you can invest as an investor, also known as a limited partner, whereby you will only be required to supply the funds.
Just as is the case with REITs, you will be able to earn passive income, perhaps monthly, without being actively involved in the daily running of the property.
Crises often present challenges to the traditional way of doing things, including real estate investment. As such, the players in the affected industry must take time to come up with smart strategies to counter the negative effects brought about by the changes.
In real estate, this must be supported by thorough research aimed at understanding real estate investment strategies. Acquaint yourself with the housing trends and statistics to make informed decisions.
Now that you are aware of some of the investment strategies you can apply to earn from real estate during a crisis, we believe your investment crisis is half-solved. The other half depends entirely on you taking a step towards implementation.