Do you have extra funds you want to put to work for you and are torn between the stock market and real estate? In truth, both are not terrible picks – especially if you take advantage of someone’s panic selling – but while the stock market has shown itself to be volatile during these times, real estate can be rock solid. Especially if you make sure to take a few extra steps when selecting your first property.
Strong Markets and Their Indicators
If you want to have a successful real estate purchase during trying times such as a global pandemic and a volatile economy, you need to keep your eye on a few choice indicators. These are job growth, population levels, and affordability. You should always keep these three in mind when you’re looking at buying properties, though not often in the way you might think. There are a few other aspects you need to consider when analyzing data.
Job Growth and Changes
Look at the job market in the area in question prior to COVID-19’s impact. Was it thriving, growing? What were the industries that were? You want to find an area that was strong with jobs with future potential, areas that are almost guaranteed to survive the pandemic or at least make a come back. These are typically industries like technology, bio-technology, health care, military and military production, as well as higher education. Are they still there? Will they come back? That’s what you need to keep an eye out for.
Was the Area Hit Really Hard?
This is related to population and covers a wide range locations, including major centers of commerce and wealth like New York City, Los Angeles, Chicago, etc. They have super strong economies, some of the most powerful in the world in fact, but they were slammed by COVID-19 hard and suffered for it. Also, they’re expensive – an asset in these locations will cost far more than others, taking a long time to give you a return on investment. Instead, look for areas that were growing prior to COVID-19 and seem to be growing quick after, showing a strong recovery.
Target Appreciation Instead of Cash Flow
This is more of a personal opinion, and can change depending on your current situation, but if you already have a stead source of income that you can rely on and be comfortable with, buy real estate based on value. Making cash flow from investment property can be nice, especially as a buffer and as passive income, but the real prize is how much the asset increases in value due to demand. That’s why you want to target growing areas with a strong chance to recover – more people want a home in that area, either to rent or buy. You’ll get a much higher rental value, or turn around on investment, if you target appreciation with the future in mind.
Overall, real estate is a strong pick for both new investors that want to get their start and for senior investors that want to diversify their income. You just need to make sure you keep several factors in mind when you’re purchasing and always make sure to be looking forward!