Real Estate Investment Forecast 2021 – Is It Time to Take Risks?

A new year brings a new outlook and opportunities for real estate investment. The COVID pandemic, along with the economic and political impact of 2020, will soon be behind us. However, many landlords and investors wonder how these events will carry over to 2021 and beyond.

So, is now the best time to invest, or is the real estate market expected to come tumbling down? Let’s answer that question together as we examine the real estate investment forecast for 2021, along with how to strategize and find the best deals. Continue reading below to see if 2021 is the year to achieve your financial goals.

The Real Estate Investment Forecast Amid COVID-19

Experts agree that, at least for now, interest rates will remain low as the country recovers from the COVID-19 economic impact. That said, a mix of low inventory and high demand from those seeking to take advantage of these low rates is fueling a seller’s market.

As the COVID pandemic began, home sales quickly dropped, and some sellers pulled listings due to the uncertainty. Consequently, those remaining active listings were considered motivated, which gave buyers a brief upper hand. However, the real estate investment forecast for 2021 is gearing up to be far more competitive.

Upcoming Real Estate Investment Trends for 2021

• Supply Struggling to Meet Demand – Active listings are down; in fact, they have dropped over 30% year over year. As more sellers become confident as uncertainty hopefully diminishes, additional listings should spike. However, this will not happen quickly enough to have a projected shift in the market anytime soon.
• Increased Buyer Competition – According to Realtor.com, average days on the market for active listings is down 18% year over year. Therefore, available homes are selling and selling quickly. So, investors need to be extra vigilant in preparing offers and having available funds to close quickly to secure the best deals.
• Climbing Prices – Since demand is high and supply low, this signals a spike in price. Zillow’s market forecast predicts that prices will continue rising above pre-pandemic levels.  Additionally, low inventory, favorable rates, and increased demand are all factors that contribute to the jump in prices.

Strategies to Navigate the 2021 Real Estate Investment Forecast

When it comes to the 2021 real estate investment forecast, some strategies stand the test of time. Finding and purchasing the right rental property will always require individuals to perform their due diligence. Now more than ever, investors must use available metrics to make informed decisions quickly. That said, continue reading below for some strategic tips to help you navigate the real estate market in 2021.

1. Analyze More Than Ever – Rental property investment hinges on the numbers and potential profit. Therefore, as prices rise, accurately evaluating earning potential is more important than ever. So, take a close look at current rental market conditions, average price, and job growth in the area. This allows investors to come into a deal, knowing the exact margins needed to turn a profit.
2. Break Out of Your Comfort Zone – A competitive market plays a significant role in the 2021 real estate investment forecast. While many areas comply with a seller’s market trend, every neighborhood is slightly different, and there are still deals to be had. The new year is a perfect time to explore new markets and expand your horizons to meet today’s growing rental market needs.
3. Added Space Means Added Value – According to Upwork, more than 41% of the workforce continues to work from home. Heading into 2021, an estimated 27% will continue remote work throughout the year. Therefore, renters seek additional space to accommodate a home office or even remote schooling for children. So, renters are searching for enough space to separate work from home life at a great value. However, investors must still closely evaluate comparable homes when setting rental rates. While greater square footage does add value, the rental rate still must fall in line with the local market.

Emerging Strategies that Adapt to the Real Estate Investment Forecast

The changes surrounding COVID-19 have made many companies and businesses go remote. Therefore, this has opened up possibilities for renters that no longer have to weigh their options based on commute. So, let’s examine three new emerging trends that investors can take advantage of in 2021.

1. Fix-to-Rent Foreclosures
2. The Suburban Shift
3. New Construction on the Rise

Fix-to-Rent Foreclosures

Even with relief packages and moratoriums, rent and mortgage payments will eventually need to be caught up. Unfortunately for many individuals, unemployment rates and economic struggle will lead to a surge in both evictions and foreclosures.

Savvy investors are looking at 2021 in much the same way as they did in 2008. While not as drastic as the market collapse in 2008, 2021 is expected to see its fair share of foreclosures. For those financially capable of pouncing on deals, this could be a profitable time.

Since inventory is an issue in the real estate investment forecast, landlords must consider all of their options. Foreclosures come with some uncertainty, but for investors willing and able to complete repairs beyond cosmetics, the profits could prove worth the risk. So, investors with an established vendor network or rehab know-how may have the upper hand in 2021.

The Suburban Shift

Low-interest rates drive high demand despite unemployment rates struggling to recover in many areas. Those who once flocked to urban areas to be close to work now seek solace in the suburbs. So, as children remain in distance learning, and individuals enjoy the flexibility of working remotely, the suburbs offer the space everyone needs.

The 2021 real estate investment forecast indicates a shift of renters looking for different amenities such as home office flex space and private outdoor areas. Therefore, investors should check out single-family homes in neighborhoods with good school districts, low crime, and a strong growth rate.

New Construction on the Rise

The limited supply of homes in the in-demand suburban areas is also driving increased new construction. Experts looking to the real estate investment forecast expect a continued rise in new builds despite rising construction costs and unemployment rates. In fact, some metrics show the material cost for new homes has risen around 130% year over year.

However, the once plentiful, undervalued, slightly distressed properties are hard to come by. So, investors in 2021 will need to consider new construction as an option to combat the lack of other opportunities. Therefore, individuals with experience managing construction budgets may find that it is the best option for a solid investment return.

Finding Deals in a Changing Real Estate Market

When the real estate market is at its most competitive, investors need every edge they can get. Understanding the local market and how it is bouncing back amid COVID-19 is vital to a landlord’s success. So, with that in mind, check out these tips below.

• Do Your Homework – Before beginning your search, narrow down your target neighborhood and know what you can afford. Additionally, have an idea of the metrics you need to meet in order to achieve a good return on investment. Doing so allows you to evaluate options and jump on great deals quickly.
• Enlist the Help of a Realtors – An experienced real estate professional has access to the tools every investor needs to get a jump on the market. Therefore, in an especially competitive market, any assistance in locating listings is a plus. While it is the investor’s responsibility to run numbers to confirm a potential deal, seek a realtor with experience working with investment buyers.
• Be Aggressive – Investors must react quickly in order to secure the most profitable deals. Therefore, in such a competitive market, investors must be aggressive. Even the slightest hesitation can allow another buyer to swoop in, and investors can miss out. So, this is not the time for low ball offers. Instead, run the numbers and make a reasonable offer that fits your budget and ROI needs. Alternatively, if the numbers do not add up, move on.
• Rely on Professional Management – Chasing deals takes considerable time and effort, but so does running a rental property business. Successful investors know they cannot be in two places at once. Therefore, instead of spreading yourself too thin, enlist a professional property management firm. They take over existing properties and tenants to free up the owner’s time and resources.

The Role Risk Plays in the Real Estate Investment Forecast

Real estate investing naturally comes with a degree of inherent risk. Will the market in 2021 carry even more risk? Possibly. Let’s take a look at two important considerations for any real estate investor below.

Increasing Regulations

The pandemic has brought to the forefront of the government’s influence on the rental market. Many states have already enacted legislation that extends renter protection far beyond the eventual end of COVID-19. Landlords and investors alike must plan for additional rent increase freezes and possible evictions stays in the future.

Pandemic Uncertainty

The unemployment rate is expected to remain elevated over the coming year. That said, it leaves some uncertainty in the market’s direction and how quickly jobs will bounce back. Therefore, investors must analyze the numbers and continually analyze them to ensure their investments stay viable.

Final Thoughts

The COVID-19 uncertainty leaves a few questions in the real estate investment forecast for 2021. That said, investors willing to think outside the box with the time and capital to invest could profit big in the coming year. Whether you are looking to expand your portfolio or maximize the ROI of the properties you already have, professional rental investment management can help. At Bay Property Management Group, we specialize in knowing the local rental market’s ins and outs while staying up to date with changing industry regulations. Our dedicated team works with owners to implement strategies that get the most out of their investment. Give us a call today to learn how third-party property management can boost your portfolio potential in 2021.