If there’s one thing that the real estate industry can learn from the Coronavirus pandemic, it’s the awareness for crisis response and management to avert potential problems that can affect the industry.
The global health crisis has indeed rocked the real estate industry, as those actively involved in it were wondering what’s in store and what the future holds for a highly-social industry.
But those fears were allayed since the real estate industry has historically gone through ups and downs, but has always stood up and moved on.
When a crisis occurs, what should real estate stakeholders need to be aware of and consider?
For instance, investment assets become a vital consideration especially when it comes to protecting the investment and ensuring sustained profitability.
During a crisis, there’s a greater chance of poor-performing investments further declining until market forces go back up and revive the economy.
In the case of real estate, slow economic activity usually contributes to the decline in cash flow, which can impact real estate investments, except for properties that can still be held by investors until the market drives values to move up.
But there’s always a silver lining
A crisis period may provide good investment opportunities for those who are prepared and the recent global crisis has caused an impact on the real estate industry.
Consumer and economic uncertainty have caused a softening of home prices and those who felt distressed were open to negotiating prices.
Moreover, mortgage rates remained low in efforts of lending institutions and regulators to make it less challenging for those still reeling from the economic impacts of the pandemic.
But looking at it from a different perspective, this might also be a good time to increase your investment portfolio.
While the current situation is still leaning towards supply and demand, people might be discouraged from making large purchases due to uncertain times, but that can be your opportunity to get a good deal.
If you have an opportunity to purchase a property and can provide you with your potential ROI targets, then investing would make very good sense, but don’t take too long to act on it because it might be gone too soon, just make sure to study the market and analyse it well.
Have a financial plan
Vacancies can be painful especially for rental properties and they can drain your profitability and become a liability soon.
The 2020 mid‐year data on the industry showed that rental payments dropped 17% in April compared to March figures, which carried on until the end of last year. Just imagine your finances drained for the absence of income due to vacancies or failure of tenants in paying rent due to unemployment or business insolvency.
This is one scenario that you need to seriously plan for and make assumptions based on historical and current data to see how you can adjust your finances to prepare for your contingency plans that will help keep your investments going even during a crisis.
As a rule of thumb, plan for contingencies that could last for up to three to six months so you may be able to cushion the impacts of a crisis.
Stay updated
Whether you self‐managing or availing of property management services, it is always important that as an investor to stay updated on the latest news in the market.
Market forces may dictate some situations that may not bode well for some tenants, which could also affect employees or those tasked with managing the operations of the investment property.
As the investor, you would always need to be on top of the situation and be able to come up with plans that would protect your investment assets, at the same time, adhere to policies or regulations that may be changed to adapt to the current market and economic situations.
Do not panic
Crises will undoubtedly cause investors to be anxious about their investment status and conditions, especially with new investors.
Always make sure to not panic, as it may affect decision‐making. Instead, clear your mind and analyse the situation carefully and make use of data and statistics to help you make wise and smart decisions.
When you have established your crisis management plans, you can be assured that your investment assets will continue to sail smoothly.