With the current pandemic still going strong many entrepreneurs and real estate professionals have struggled in understanding why the vast majority of the market hasn’t yet come to the “old normal”. With such idea in mind, many have asked themselves the question “is real estate still a valid sector to invest in?” Let’s find out.
The Situation
According to Forbes “The current economic downturn has drawn several comparisons to the most recent recession. While the causes are significantly different, lenders have tightened their criteria again for home purchases for both home buyers and real estate investors. Recently, the FHA has significantly tightened their credit scoring criteria for qualifying for a loan. In addition non-qualified (NQ) lending has reportedly taken a hit as well. This is a significant concern for some real estate investors that need short-term lending to purchase and renovate if they do not meet income standards.”
This is a clear example of why many decided to move towards quick buying processes such as commercial property auctions and residential property auctions.
Analysing What’s Happening In the US Will Help
Ahead of what will most definitely happen in Europe, with unemployment increasing as a result of this pandemic, anyone owning rental property is likely concerned about their tenants’ ability to pay. Because of the passage of the CARES Act, evictions are frozen for 120 days starting March 27, 2020 for renters who live in properties that receive federal subsidies such as Section 8 vouchers or for renters whose landlords have government-guaranteed loans, including loans backed by Fannie Mae, Freddie Mac, the FHA, or the USDA. If the rental unit is not covered by the CARES Act, many individual states have issued similar suspensions on evictions.
A Big Opportunity Within The Commercial Property Sector
According to Grant Cardone: “If your property is leased out to a small business(es), then you may want to work with your tenant to make sure that they have applied for the Payroll Protection Program if they are eligible. If your tenants qualify for the PPP, then they can use a portion of those funds to pay their rent, which is a huge relief to you. Similarly, if you currently pay yourself a smaller salary but get more of your income from the rent your business pays to you, the PPP can help your business not only protect your paycheck but also the rent you pay to yourself as long as it is reasonable for the local market.”
