Given the latest developments with the Covid-19 pandemic, the business landscape has experienced a considerable downturn. The pandemic has seriously impacted all businesses, regardless of sector, and the long-term consequences are likely to be severe.
Many businesses will close, leaving lots of people jobless. It will damage the global economy, leading to a recession, which according to experts will be worse than the recession of 2008.
Like any other industry, real estate will also be affected because in times of crisis people tend to save rather than spend. However, up until the Covid-19 outbreak, the industry had been generating relatively good profits year after year, making it the ideal investment option for aging populations.
On top of offering a high cash flow and appreciating predictably in value, real estate has offered equity growth through debt reduction. This positive leverage has helped investors keep up with inflation and worry about fewer investment risks.
Investment experts predict that the real-estate industry will continue earning investors higher returns going into 2021. Next year will see most real-estate equity firms realize full growth potential.
The following five real-estate opportunities will also crop up for entrepreneurs to leverage in the coming year.
Property mutual funds
Once we get back to normalcy, entrepreneurs will need an investment option that allows them to limit risk and at the same time minimize involvement in active management. Real-estate mutual funds offer that and more.
This investment method involves real-estate companies using stocks and other specified securities to purchase property on behalf of investors. These funds are on the uptake and are expected to take shape in the coming year, particularly because of increased residential and commercial vacancy rates in some markets.
The risk involved in investing through real-estate mutual funds is significantly lower than when you buy and manage property individually. And like most mutual funds, these funds are extremely liquid, so you can cash in on them at any time. That is new to the real-estate world.
Here, investors come together, combine funds, and jointly invest in trust. Real estate investment trusts (REITs) have seen exponential growth in the last couple of years, with some predicting that they will become even more profitable going into 2021.
When investors acquire property through a REIT, they become beneficiaries of the investment trust and become eligible for a share of any annual profits that the property makes. The profits can be generated from either selling or renting out the mutually owned property. Going forward, investors will have many REIT investment opportunities, including investing in shopping malls, hotels, warehouses, and office buildings.
Real estate notes
Say someone wants to buy property, such as a home, but doesn’t have the capital. In that case, you step in and provide loan financing for that person, with an agreement that he or she will be paying you interest and principal on the loan. Real-estate notes are documents that authenticate such transactions and guarantee that the borrower will be paying the financier the amount and at the intervals agreed upon by both parties.
Real-estate notes have been growing in popularity over the last decade. These notes can be sold in the real-estate market at a profit. The idea here, therefore, is to cash in on the notes when the market suits you.
Last year witnessed impressive growth in real-estate-focused companies. There are now thousands of real-estate startups in the world, cumulatively managing hundreds of billions of dollars’ worth of property. Technological advancements such as the growth of artificial intelligence and machine learning have helped real-estate startup companies grow exponentially within very short durations. You can easily make good profits by searching for a promising real-estate company and investing heavily in it.
Renting out property is one of the best long-term projects any investor can take on. Rentals make money consistently and steadily over the years while all along preserving the initial value of the property, if not raising it. All you need to do when you eventually decide to sell a rental property after years of use is to remodel or renovate the outdated or damaged areas.
Traditionally, landlords believed in renting out their properties to people who were planning to stay in the property for a long time. But this model is quickly being overtaken by short-term rentals, especially in areas that welcome a large number of visitors around the year.
Real-estate is still a splendid investment opportunity. It always has been, always will be. And because of its guaranteed stability and profitability, every serious investor must look for ways to leverage this industry and grab every opportunity it presents.