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Out of all the ways to generate real estate income during the COVID-19 pandemic, the methods that will bring you the greatest returns are going to be long-term strategies. Even if you buy several good properties right now, you’re not going to see a real return on your investment for awhile.
Property investment is already a long-term game. However, since the economy isn’t currently growing, you won’t see returns for a long time.
Real estate expert Nonhlanhla Ayisela told the Daily Maverick that investors in South Africa need to stick it out for at least five to ten years to see a return. That’s a long time to wait, but the future of the economy is uncertain at this time. The situation is similar in the United States. Nobody knows exactly when the economy will recover.
If you’re willing to do things a little differently, here are some ways you can create long-term income from real estate during the pandemic.
1. Buy Shares in Companies that Own Real Estate
People have been selling real estate shares rapidly. Shares in companies that own offices, warehouses, and shopping malls have dropped significantly and are available for purchase at a discount. It’s a loss for those who had to sell their shares, but will be profitable for those just starting to buy the shares.
Just be aware that dividend payments may not be paid according to the usual schedule until there’s an indication of economic recovery on the horizon. That could take a year or more. However, the economy has to bounce back eventually.
2. Hire a Property Management Company
Hiring a property management company is an expense worth every penny. Think of property management like an asset that puts an entire team of people by your side to handle everything on your behalf. Your team will handle all legal issues, evictions, tenant screening, rent collection, repairs, and anything else your property requires. The benefits? More time, more freedom, less stress. This is especially important when handling long-term real estate.
For example, say you’re looking to buy multiple properties in Austin, Texas. You’ll benefit from hiring a property management company to take on your landlord duties. You can’t easily acquire multiple investment properties if you’re tied up sorting through applications, running background checks, collecting rent, and calling in repairs. So it makes sense to hand over those duties to the pros.
3. Buy Residential Property
Interest rates for residential mortgages are low right now, which means it’s a great time to buy residential property. Provided you have a steady stream of income that can withstand the effects of the economic shutdowns, buying residential property now can net you big returns in the near future as a long-term real estate investment.
When the economy does recover, interest rates will quickly rise. If you wait until the economy recovers to buy property, you could end up paying even more for the property because, by that time, most available properties will likely be owned by the banks due to foreclosures. You’ll likely have more competition in the future than you have now, so buy your residential property while interest rates are low.
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4. Slow Down on Investing in Foreign Real Estate Investment Trusts (REITs)
Foreign REITs have been struggling to maintain cash flows thanks to the coronavirus pandemic. Some tenants aren’t able to pay rent while others outright refuse. The lack of rent payments is putting REITs in jeopardy and many aren’t able to pay out distributions.
5. Rent Long-Term Real Estate Properties by the Room
Most landlords don’t rent properties by the room unless they’re considered college or university housing. However, times are tough for many people and rooms are all some people can afford.
Say you have a three-bedroom single-family home that normally rents for $1,800 per month. You can rent each room to separate individuals for $800 per month and net $2,400 in rent. Each person renting a room will be paying less per month than they would be otherwise and you’ll be making a profit.
Stay Focused on Your Long-Term Goals
No matter what investment strategies you embrace during this pandemic, stay focused on your long-term real estate goals. Don’t dump your investments too soon just because the economy is taking a while to recover. Real estate profit won’t snowball overnight in normal circumstances, so you’ll need extra patience during this pandemic.
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