(Newswire.net — July 27, 2020) — The COVID-19 has reshaped the economy in a number of different ways, and some of these effects are still unfolding. Millions of people have temporarily or permanently lost their jobs, the stock market has fluctuated wildly, and nobody’s sure when in-person businesses and supply chains will return to normal (or if they will).
Surprisingly, despite property investors preparing to lose money from tenants unable to pay rent, interest in rental properties is actually increasing. But why is this the case?
A Safer Investment
One potential explanation is that investors are beginning to see rental properties as a “safer” investment option than something like the stock market. As fears about the pandemic grew, stocks across all industries (but especially those in the travel sector) tanked, and many experts broadcasted predictions that we were in store for a new “great depression.”
Of course, in the months that followed this initial crash, stocks bounced back. Since then, they’ve been fluctuating wildly, with some experts claiming the bounce back was irrational and others claiming the crash was exaggerated in the first place. As an average investor on the sidelines, this is scary territory either way.
Contrasted with the stock market, rental properties look like a safer, more stable investment—and one that’s easier to understand. So if you have extra money to invest, you might consider a rental property instead of investing in stocks.
Diversifying Streams of Revenue
Unemployment hit record highs during the first wave of lockdown in the United States, and many people are still out of a job. Those that are still enjoying consistent employment have realized the inherent instability of the economy, and may have less faith that their job will sustain them indefinitely.
Rental properties represent an opportunity to diversify your stream of income. If you lose your current job, the income from your rental could hypothetically sustain you, at least temporarily. And if you keep your current job, the extra income from the rental can help you build a stronger emergency fund, or accumulate wealth. In the wake of the pandemic, this looks like an even more attractive option.
Extra Time and Management Potential
It’s also worth noting that people may find themselves with extra time during the pandemic. They may be out of work entirely, or might be suffering from reduced hours. Even if they aren’t, they may be working from home, enjoying the benefits of a suddenly reduced commute. This extra time can be put toward new projects and side hustles—including the active management of a rental property.
Of course, people without much extra time can still get involved by hiring a property management company. Since most property management companies charge a rate based on your rental income, it’s an affordable option for most property owners.
The Predictability of Rental Income
One of the hallmarks of the COVID-19 pandemic is uncertainty. Nobody is sure exactly how the economy is going to be affected by the pandemic, especially long-term, and nobody knows which industries are going to suffer or recover.
That said, certain human needs remain fundamental, and people will always need a place to live. No matter what emergencies are currently occurring, you can rest assured that tenants will need a place to stay. This long-term security makes rental properties an attractive option for someone looking for more financial certainty in their lives.
Varying Housing Market Signals
The housing market is sending mixed signals in the wake of the pandemic. Prices and sales aren’t yet showing a clear trend. In some areas, there’s a decline in buyer interest because people want to stay in place, and because buyers may not have access to enough funds to justify a new home purchase. In other areas, buyers are excited to see housing prices drop to affordable levels for the first time in years. Accordingly, rental property investors are seeing this as a possible opportunity—they’re searching for potential deals as prices fluctuate and trends begin to stabilize.
Low Interest Rates
It also helps that interest rates remain low, in an effort to combat the negative economic effects of reduced consumer spending. Property investors can get property loans for about as cheap as possible, and they may have a higher likelihood of getting approved for a loan as well. This makes any property purchase a more attractive option.
It remains to be seen exactly how the COVID-19 pandemic will affect the housing market, the rental market, and the economy overall. However, early trends seem to indicate that property investors and financial opportunists are using this as a chance to establish a foothold in the rental market. This trend may escalate or decline as we learn more.