The United States is experiencing yet another recession. But unlike the Great Recession, which was directly connected to the US housing market, this recession is caused by a virus—the COVID-19 virus. The COVID-19 pandemic caught everyone off guard. No one expected this to happen. Because the pandemic came as a surprise, plenty of properties initially on the market are now available. There are also plenty of motivated sellers eager to sell during these times at meager prices.
Making it a great opportunity for investors to buy some good property for less than its actual value. However, since we face a pandemic, there are still some challenges that come with investing in real estate today. Here’s how you can decide whether you should invest in real estate at this time:
Is your credit score good enough?
Due to the pandemic, mortgage companies are offering meager interest rates. For the first time in five decades, mortgage rates have fallen below three percent. Thirty-year fixed mortgages are now averaged at 2.98%. At the same time, 15-year fixed-rate mortgages averaged 2.48%. Making it a record-low and a great time to purchase mortgages and refinance. But there is one major challenge buyers and investors will have to face. Banks and lenders now have stricter loan requirements. However, it shouldn’t come as a surprise. It’s not unusual for lenders to make requirements tighter during a recession.
Pre-pandemic, lenders would require at least a 500 credit score and a 10% down payment to secure a loan. Now, most lenders require borrowers to have a credit score of around 650 to 700. According to CNBC, the average American’s credit score is 700. However, the likelihood of changing during the pandemic is high (seeing how many people are becoming unemployed). If your credit score is good enough, take this as an opportunity. Chances are, you won’t get an opportunity like this again, especially when the pandemic is over.
Are you thinking long-term?
Investing in real estate is a great idea if you’re thinking long-term. It’s not ideal for those looking to earn quick cash. That’s because real estate isn’t as liquid as stocks and bonds are. But, compared to the stock market, real estate investments provide better returns with lower volatility. History has also proven, time and time again, that the longer you hold onto your property, the higher its value gets. Of course, the pandemic is a different case. But if you’re patient enough to wait until after the pandemic is over, you’ll see that investing in real estate is worth it.
Do you have enough cash on hand?
Because some challenges come with buying a property at this time, such as tenants not being able to pay rent or having to pay for your property even while no one is living in it. You have to make sure that you have enough money on hand to handle these issues. You should have enough cash on hand because with lower interest rates, lenders also expect higher credit scores. If you have a good credit score but not enough money to pay the down payment, you won’t get a good loan.
Remember to ask yourself these three questions before thinking about investing in real estate during this time. Many people are eager to sell property nowadays. You might even get a lower price if you negotiate well enough. That, and the fact that low mortgage rates are available, makes investing in real estate at this time a good opportunity. That is, if your answers to these questions are ideal.