Filtering through the best real estate investments can be difficult enough as it is. At best, assessing the real estate market is a game of educated guesses, which has worked out great so far. But what happens to the real estate dynamics when a pandemic strikes?
For most people, the uncertainty of the real estate market has been exacerbated in a post-Covid world. Our traditional modeling techniques never anticipated the effects of a novel pandemic on the globalized world.
On the other hand, many market appraisers believe that this has had some positive property value implications. However, you need to know where to look.
Still on the fence about real estate investments in 2021? The good news is, you still have a lot of excellent options to choose from.
This is a guest post from Kyle at Financial Wolves.
An Overview of the Best Real Estate Opportunities For 2021
2020 has seen an unprecedented shift in the projections of property value. This is not to say that all property value has depreciated, only that the market dynamics have shifted.
People are moving away from high-density epicenters and flocking towards more moderate locations. Concurrently, the office market is in limbo as work-from-home has opened up new structural possibilities for multinational companies.
In the short-term, the vacation rental market has also experienced a collapse.
Generally speaking, the “survivalist” markets will experience the most increase in demand. Specifically, these include private residential markets in urban and suburban areas.
However, brand-name markets that have been going strong for years will rebound quickly. Short-term hits are usually overlooked for long-term returns.
The thing to remember is that a real estate investment is not one-size-fits-all. As an investor, you have to weigh out short-term ramifications for long-term costs.
In hindsight, the game hasn’t changed, only the rules have. The good news is that real estate continues to be a proven, straightforward income-generating asset no matter the economic or social cycle that we live in.
Find the best real estate investments for you, invest, and keep that income flowing!
Top 8 Real Estate Investments for 2021
Here are some of the top options if you want to invest in real estate in 2021.
1) Single Unit Residential Property
Rental property and residential real estate has always been a crowd favorite, simply because of its simplicity and reliability. Investing in a single unit house is arguably the smartest way to go, mainly because of its simultaneous versatility and consistency. Given our analysis of the current times, it’s the top of our “Best Real Estate Investments” suggestions.
- Generally speaking, rental property is an excellent source of passive income.
- Initially, it does take time to overturn the mortgage, but soon enough, the profits start coming in.
- Contrary to predictions, recent reports have noted the housing market’s resilience as a sign of economic recovery.
- On the one hand, the shift of demand towards suburban areas, in tandem with low-interest rates, has actually seen a record time high in builder sentiment, especially in single unit rentals.
- The reimagination of housing spaces to cater to work-from-home and study-from-home has many positive implications for single unit rental property. This means that people are looking for bigger homes.
Overall, flipping low-cost houses gives investors a lot of flexibility in exchange for very low upfront costs.
For many people, Airbnb is just another off-hand way to make a few extra bucks on the side. But this short-stay accommodation has actually gained a lot of traction as opposed to vacation condos and second homes.
Re-imagined in a new context, Airbnb is an emerging but very promising for the best real estate investment for 2021.
- People are actively looking for alternative short-term accommodations in the wake of the pandemic.
- Airbnb can be more lucrative than single unit rental properties. This is because short-term rentals allow and require the owner to charge higher as opposed to a long-term tenant.
- Roughly speaking, you can expect to make more than twice as much from Airbnb as opposed to traditional renting.
Following the upward trend of residential real estate markets, apartments, and apartment complexes’ net value has continued to rise. While certain cities deal with stagnating rents, most have seen an increase in demand for apartment sales.
In fact, in some places in the UK, office blocks are being turned back into apartments. With the job market suffering a heavy blow, young people are looking to rent instead of buying. This means the demand for affordable rentals is actually increasing
For investors, this means catering to a more significant influx of people looking for short or long-term rentals. It also means easier up-front investments due to exceptionally low interest rates.
Industrial real estate is projected to be the highlight of 2021. The economic downturn hasn’t been as bad for industrial real estates such as warehouses and factories, as it has for other commercial real estates.
In particular, big-box warehouses are reinforced by an increased leasing demand. According to Forbes, the rent collection rates for big-box warehouses have been almost 100% despite the pandemic, and it looks like it will only get better.
- The retail market has been rapidly shifting to an online platform. While this might be bad news for retail real estate, increased e-commerce activity means that retail stores and distributors will seek a lot of storage spaces.
- Generally speaking, warehouses are low-maintenance. Acquiring pre-existing facilities opens up a world of possibilities.
- There will always be an influx of new tenants, from leasing to small retailers to pre-established large e-commerce platforms.
- Generally, large warehouse facilities in close proximity to ports will be the smartest choice. The high demand for storage facilities in gateway markets reduces long-term risks.
- On top of that, warehouses can be turned into anything. Demand for co-working spaces has been on the rise.
There is little that can go wrong with warehouses as a real estate investment. So, as technology continues to reshape the industrial and commercial market, warehouses are a good starting point for investors trying their hand at safe and consistent real estate. It’s truly one of the best real estate investments if you’re looking to keep things safe and simple.
5) Healthcare Real Estate
There are some retail real estates that are still thriving in the post-pandemic world. While commercial real estates such as hotels and malls have suffered, some service providers have actually been expanding into retail because of the pandemic. This includes healthcare providers.
- The segmentation of healthcare services will carry on even after the pandemic. This means that hospitals will continue to cater to acute cases.
- At the same time, the healthcare structures will integrate preventive clinics into the heart of population centers.
- Simply put, medical service providers will expand into retail. This allows for a more comfortable and intimate patient-doctor dynamic.
- Medical retail in the heart of residential populations is more convenient and accessible for many people.
Similar to work-from-home, medical retail is a legacy of the pandemic that will form the new normal. Therefore, going into 2021, it is reasonable to embrace these changes and invest in emerging markets such as medical retail.
6) Office Markets
Despite the discouraging projections, office markets are expected to recover in the following decade.
The prospects for commercial real estate really aren’t so bleak as long as you can adapt to the new demands.
- The need for office spaces will never completely vanish, even in a post-COVID world.
- Even in the worst case, the working environment will be a hybrid of traditional office settings and work-from-home.
- This could mean a complete upheaval of traditional office designs. But this could be a good thing for investors, as companies will actually start to seek new office spaces to abide by the new rules.
- Restructured office markets are especially favorable for new investors because it’s an opportunity to buy new spaces with the potential for low-cost renovations.
- These renovations will appeal to the rising demand in restructured office designs.
- Some office spaces are as strong in demand as ever. Medical Office Buildings have remained resilient in an otherwise bleak commercial real estate environment. This is mainly due to the MOB’s diverse nature.
- These offices rent out to a diverse range of tenants with long-term leases and strong credit. This consistency makes these buildings very attractive to other like-minded practitioners, who will seek out these office spaces as well.
Still part of the best real estate investments for 2021? Down the list sure, but still a market that will never fully go away.
Vacant land has remained hugely underrated as compared to residential and commercial real estate. However, there are many overlooked benefits to investing in raw land, especially in 2021.
- First of all, the acquisition cost and start-up capital of vacant land are at the lower end of the spectrum.
- The typical timeline to develop vacant land is between 1-2 years. So, in only a few years, you can create virtually any property you want.
- This flexibility makes it easier to appeal to the market and bypass the aversion towards pre-existing real estate in the current real estate milieu.
- From infrastructure to storage facilities to residential buildings, you basically have a headstart in adapting to the post-pandemic world.
Crowdfunding real estate is the hallmark of a rapidly digitizing real estate market. It has made real estate investments more accessible to everyone, including small investors.
When the real estate market becomes extremely restricted, crowdfunding allows more people to diversify their financial plans with fluctuating demands and high competition.
- Crowdfunding is especially attractive for young people seeking financial security. Companies such as Fundrise and RealtyMogul can get you started with as little as $500 or $1,000, respectively.
- Unlike other accredited and private companies, crowdfunding does not have a minimum net worth or income requirement.
- Additionally, crowdfunding is mainly a passive real estate investment.
- With a relatively short time horizon of 5-10 years, it can act as a gateway to a more diversified real estate experience.
For a whole demographic of young adults entering into an uncertain job market during a global pandemic, accessible real estate can really make a difference.
Best Real Estate Investments for 2021 – In Conclusion
Real estate has always been about embracing unprecedented change instead of fearing it.
Going into 2021, the real estate outlook may look daunting at first. Investors and appraisers make a note of the fact that the real estate sector will never go back to the way it was.
But that’s the point. Nothing is going to return to “normal.” But that doesn’t necessarily mean that it’s going downhill.
It might appear that real estate is not a good investment, given the unpredictability of the market. In reality, it’s only a matter of seeking out the best investments.
This is a two-fold process. On the one hand, you need to assess the trends across the different real estate options. On the other hand, it is ultimately a matter of your own preferences, expectations, and capabilities.
Author Bio: Financial Wolves is a blog focused on helping you make more money to achieve financial freedom. After repaying student loans, I’ve shifted my focus to make more money from side hustles, real estate, freelancing, and the online economy. Follow us on Pinterest, YouTube, Twitter, and Facebook.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.