When the COVID-19 pandemic hit the U.S., many real estate investors found themselves in a tough situation because tenants lost their jobs and couldn’t pay rent. Conditions became even more difficult for many landlords when state and federal laws were enacted to allow tenants to live rent-free for up to two years in some cities.
Some owners couldn’t afford their mortgages any longer and went into foreclosure. Others had sufficient capital to stick it out.
More than two years later, some landlords are still owed $50,000 or more in unpaid rent. Not all were willing to go into debt, however. Many bailed and sold their properties to avoid financial ruin.
The housing market is slowly returning to a semblance of normal now, and investors who held onto their properties are starting to recover. Here’s how they’ve survived.
1. Investors are outsourcing their landlord duties
As investors recover from the pandemic, they’re outsourcing their landlord duties to property management companies. For example, Green Residential’s property management services in Houston allows investors to focus on growing their business without bogging down in the minutia of property ownership.
This gives investors time to search for new opportunities and their long-term strategy. For real estate investors who hung onto their properties, time is valuable, and outsourcing landlord duties is how they’ve gotten the time to make the comeback.
Being a landlord is exhausting, time-consuming, and grueling. If it’s not an activity you enjoy, you’re better off putting it in the hands of a professional team.
2. Investors are buying property differently
Even though the housing market is making a comeback, there’s no denying that market conditions are different. With “The Great Resignation” came the transition to a mostly remote working environment in which many more companies operate virtually with remote employees.
This means fewer people are looking for houses in specific regions and neighborhoods primarily to live close to their job. The upside is that although fewer people search a specific area for a residence because it’s handy to their workplace, plenty of non-remote workers continue to pursue housing in the general region of their work.
However, with less demand for many homes, prices have stabilized a bit and there’s a little less competition. In response to these shifts, investors are targeting areas that may not be as close to onsite job opportunities, but might be desirable for remote workers.
Since many of these areas are less expensive, some of the investors hit by the pandemic are able to buy properties once again. Let’s look a little closer at the dynamic.
Remote workers changed real estate investing strategies
Before the pandemic, many investors targeted areas where tech companies were located because the properties were in high demand. Those properties remain in high demand, but customers’ needs and expectations have altered, so the market is not as easy to define.
The current demand opts for areas that are cheap, but still in a nice location. This isn’t very specific–nice locations are a more subjective matter – which is why the demand is harder to define.
It’s a new trend that was launched by the sudden jump in remote work. Workers could conceivably live anywhere they like and still find employment with companies stationed elsewhere across the globe.
For instance, a person can live comfortably in a state like Kentucky and work for a company headquartered in New York or Los Angeles. They don’t have to come up with the outrageous New York rents that can go as high as $4,000 per month.
3. Investors are raising the rent and their standards
Post-pandemic real estate investors aren’t messing around. Today they aren’t hesitating to raise their rents to meet market standards, even if it means having to search for better tenants.
Investors are also raising their standards for tenants. For example, although the economy has recovered from the pandemic somewhat, they’re not taking any chances with people who have a history of not paying their bills on time.
Many investors are now requiring tenants to earn 3x the monthly rent and have a credit score of at least 700. Many no longer make exceptions for people with evictions on their record – even pandemic-related evictions.
Although it’s not always true, if someone couldn’t pay their rent during the pandemic, that indicates they might be living paycheck-to-paycheck and aren’t willing to accept a menial job like working in a department store.
The real estate market is going to recover fully
Experts say the real estate market hasn’t completely recovered yet, but it’s on the way. Although it likely won’t be the same as it was before covid, that doesn’t mean it won’t recover.
Housing markets are always changing. Major disruptions tend to have a lasting impact. However, those transformations can be worked around, so we should see a full recovery of the real estate market before long.
