The COVID-19 crisis is causing many to re-evaluate everything, not the least of which are their investment portfolios. In the current times of virus pandemic and economic downturn, those considering buying rental properties in the Bay Area may be hesitant to follow through. With misinformation on the rise, it’s more important than ever to do your research. However, despite the current issues we are all facing, multifamily is still a key investment. Buying rental properties is vital to maintaining long-term success in a market like this. In fact, those looking for opportunities outside of a poorly performing stock market often find a safe haven in real estate.
One reason that a recession may be a good time to purchase rental properties and not shy away from them is that they offer a stable source of income. Even when people are cutting their budgets in other areas they will continue to need a place to live, work and conduct business. The steaks and cigarettes may get cut, but rent is the last bill they will stop paying. Monthly rent is always due and rental income continues to be consistent even with the ups and downs of the stock market. This predictability and consistency in yield is particularly good for riding out a recession.
Recession periods can also be an opportune time to buy as asset prices fall and other investors may be forced to sell. Furthermore, real estate investments are a bit more flexible than stocks as investors can raise the rent when the lease is up for renewal to match inflating prices and hedge against changes in interest rates.
“I have seen three market corrections in my career. This one is no different in terms of what renters do when there is a downturn. Car payments will be late, credit card bills will be delayed, almost everything in a household comes priority after paying your landlord on the 1st of the month. Multifamily investing has been a stable for our cashflow and is a bedrock for our portfolio.”
– Rick Mirza, CEO Daulat.
When the stock market is volatile, and making wide swings, real estate can be a more reliable investment choice. Real estate investments are only loosely correlated to stock market movements and are slower to move than stocks and bonds making them somewhat safer choices during recession periods.
Certainly no investment is recession proof, but for those looking to invest in rental properties right now, there are a few things to look for. The best investments tend to be multi-family, and those in high-demand, low-supply areas like the San Francisco Bay Area market. Such rental investments tend to offer greater protection against losing value during economic slowdowns.
Those looking for an investment that offers near-guaranteed returns amid economic fluctuations and who are able to ride out the crisis without making an immediate large return are well-suited for this sort of investment. If you are comfortable with the long-term nature of investing in rentals and understand the liquidity risk, then rental properties are certainly still a good choice during the current COVID-19 crisis and other periods of economic downturn.