This year 2021 is a year of challenges after a complicated 2020 due to the COVID-19 pandemic and the world of real estate does not escape it, but the most appropriate advice from Novarise is clear: Invest intelligently in real estate.
The first thing you should do to make a smart investment is a study of the real estate market that will undoubtedly be very moved in 2021 due to a wave of evictions that is approaching in the United States as the federal prohibition expires.
As a result of the pandemic in the United States, a series of aids have been approved with the purpose of protecting the consumer. There was a moratorium that to some extent said that the owner or landlord could not evict the tenant from him if he did not pay rent until the end of the year. However, this will result in a wave of foreclosures due to the impossibility of paying mortgages.
The most viable solution
What the federal government decided to do was make the decision to extend the date of evictions, but that extension varies by state. For example, in the state of New York they approved that the eviction moratorium would be extended until May 1, 2021.
Property owners are also affected
Most of the investors in real estate do it through a mortgage, they pay a certain percentage of “down payment” and the bank finances 80% or 60%, to complete the purchase of that house.
In that case, the investor hopes that the rent will help him cover certain mortgage expenses and what is left over from there would be his profit. What happens during this moratorium period? Normally one would say, “As long as the person pays the rent, everything is cool, but if they don’t pay the rent there is a great chance that I will have to evict them.”
What this legislation says is that you cannot evict them and there will come a point where you may have reserve funds, savings, but who knows if you are also one of those people who, even though you are a property owner, also have a job and you end up losing it.
Now you have to live on your savings, on the money that you have in reserve from your income and little by little over the months that money is running out and there will come a point that you will not even be able to cover the mortgage, or you won’t have money to cover your own family expenses either, and that’s when you start to see what happens in the foreclosure market, people stop paying mortgages, go into a foreclosure.
Invest intelligently by analyzing the real estate market
By the beginning of January that wave of foreclosure started to come, a wave of people who cannot cover the mortgages, those investors who bought with their emotions and cannot cover the mortgage. Now we see that it is not how some had anticipated, because there was always that potential that the government was going to consider an extension of a moratorium to give more time to the people.
You already know that depending on your state, it may be about 60 days, it may be six months, for example, in the state of New York, we are talking about the first of May.
Consequences for Investing Owners – Invest intelligently in 2021
The CARES Act has helped many people who were in trouble during the pandemic
We must also consider those people who are homeowners, people who simply bought their house, live there and for one reason or another lost their job, or had their hours reduced.
The purchasing power is reduced, which puts you in a difficult situation in financial terms, because now you will have to adjust your budget very well and that is when we talk about the “mortgage forbearance”.
At the beginning of the pandemic, the CARES Act approved the famous “mortgage forbearance”, which is also another of the aspects in which the investor anticipates that there may be houses that are available in the market, because once this expires, there will be several ways: a family would either have to catch up on those mortgage payments, make extra payments, or negotiate with the bank. Some of them have the flexibility to offer 12 months or 180 more days.
Examples of this type of mortgages
FHA (Federal Housing Administration) mortgages
Veterans mortgages: These types of mortgages receive government support which allows you to have the flexibility to ask for an extension.
Now, there are other mortgages that are from private entities, banks like Chase or Bank of America or any other type of bank that is not part of the government and those types of banks may offer a 180 day extension or they may not.
It’s a matter of calling the bank and finding out if the extension is possible, if they don’t give it to you, you could go into foreclosure, go into foreclosure and lose that house.
On the one hand there are the investors, who can also lose the house for the simple fact that they will not be able to make evictions, and on the other side are the “homeowners”, people who are not dedicated to investment, but that they simply buy to live.
Those are two factors to consider for those looking to get a relatively inexpensive property. This happens frequently in the world of investments, what is a risk for one person is a benefit for others when investing in real estate.
Job loss directly affects rent payments
If there is no work, there is no income. If there is no work, people will not have the capital to buy houses.
See where the job boom is, see where jobs are migrating, from which field to another, are very important factors to consider not only because of the existence of employment, but also because of the demand that has to do with it. directly with the real estate.
An article in the Wall Street Journal talks about the economy having recovered 12 million of the 22 million jobs that were lost in 2020. On the other hand, there are some of the companies that are hiring in a massive way, such as Amazon, Walmart, UPS, who are dedicated to logistics. In fact, in the article they talk about the fact that the best paid jobs are as couriers, people who deliver UPS or FedEx.
Companies like Amazon were hiring in a very, very aggressive way to do all those deliveries, they were hiring a lot of people to work in their warehouses, in their centers of warehousing for the simple fact that online sales exploded, there was high demand and they needed more staff.
How does the labor market affect real estate businesses? – Invest Intelligently
If as a real estate investor your rented properties are located in a relatively close place to those storage centers, they will always be busy, they will always be in demand because the people who are working in those fields need to have access to work. The same with the people who work for Walmart.
Walmart decided to adopt a hybrid model in which they do, on one hand, delivery, or “pickup” which is when they pack all your products and leave them in the parking lot so that you go through the store and simply hand over your package. To do that you still need staff, you need people to pack, pack all those products. All demand went to that point.
The pandemic helped the expansion of digital commerce
Digital commerce gives you the opportunity to work from home and more storage centers. If you are one of the people who are dedicated to the residential area, that means that now you do not have to be tied to cities like New York or Los Angeles, because as the person who has a digital business, you have the freedom to manage your company from anywhere in the world.
Working from home is equivalent to needing a larger property because you need a room to be the home office, another room to sleep in, another room for the recordings in the event that you are doing YouTube, among others.
If you are one of the companies that sell products, that means that you are going to need some type of storage center, you may start little by little by having products in the apartment, inside your house, but there will come a point where if things are going very well, you are going to need to rent commercial premises.
For example, companies like UPS had to put shipping limits on large companies like Gap, Nike, because e-commerce exploded, everyone wanted to buy online and UPS did not have the ability to make those home deliveries.
The Small Business Stimulus Plan and Its Potential Risks
Starting the pandemic, the government not only passed legislation to protect the consumer, protect those who are homeowners or property owners, but also passed a series of legislations to help those who are business owners.
Small businesses are companies that have 500 or fewer employees. In general, almost all of them are considered small companies. As a product of these passed laws, there are several loan programs, one is called PPP (Payment Protection Program) and the other is EIDL (Economic Injury Disaster Loans).
This caused that many companies that were not needy took advantage of these problems, of the needs of the people, and began to apply for a lot of capital and received a lot of money when in reality they did not need it, putting smaller companies at risk. As a result, the government tightened up regulations, making it increasingly difficult for a business to verify the need for such funds.
When 2020 ended and businesses did not have the ability to verify that they really needed that capital, many were penalized, ended up returning the money and sometimes the government was forced to take away the premises for non-payment.
Invest intelligently in so-called mobile homes and manufactured homes
Manufactured homes and mobile homes, are they or are they not the same? Relatively, they are the same. There are properties that are regulated by the HUD, which is the Division of Housing and Urban Development, and the difference is that the houses that are manufactured before June 15, 1976, are considered mobile homes, that is, a “mobile home”. and houses that were built after June 15, 1976, are considered manufactured homes.
Invest intelligently by buying a mobile home that you can rent in different places
These houses are the alternative for those people who cannot find housing due to the high prices or are unemployed and cannot find a place to live. This turned out to be the solution for many people who are looking for profitability, a way to get more money without having to go homeless and these are investments in mobile homes or manufactured homes.
These investments turned out to be relatively stable throughout the pandemic, simply because many people are migrating from expensive areas to a relatively cheaper market.
However, the typical “mobile home” has less tenant turnover than apartment complexes and other multi-family properties, this because it is a land available to the investor installing the necessary infrastructure and is rented as a parking lot, but Instead of letting people put up a car, what people end up putting up is a mobile home.
As an investor you have less maintenance cost, because you are eliminating roof problems, wall problems, electricity problems, and all of that is at the risk of the tenant himself. The only thing that you have to worry about is simply making sure that the pipes are working in a correct way, and receiving the rent from that rental of the land.
COVID-19 does not discriminate
All people throughout the world have been affected in one way or another by the pandemic, depending on your economic stability, it could affect you more or less but it is always important to analyze what can be corrected to improve in this new year 2021, especially after getting through a year as difficult as 2020.
Coronavirus is a very serious problem not only related to health, which is the most important part, but also, economically speaking. There are people who haven’t been lucky enough to keep their jobs or the same lifestyle they used to have before the pandemic.
We have the mission of educating, we want to help everyone and we must always be grateful. As difficult as the situation seems to be, one always has to think, “You know what? There are people who are in worse conditions than me, you have to send them lots of good vibes, lots of blessings and hope that the whole situation improves”.
When we think like this, we are filled with positive vibes, we are filled with energy and we realize that it is possible. There are people who are having a very bad time, you who are in a relatively more fortunate position, you should not focus on what you do not have, but rather on what you do have and try to help your friends and family.
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