Over the last two years, the COVID-19 pandemic had an adverse impact on industries and businesses worldwide. The restrictions implemented during this period led to emptied stores, restaurants, and offices. Several people lost their jobs, causing a disastrous economic downturn, and the real estate industry was no exception. Even though the pandemic affected rental businesses negatively, it was not as severe. Instead, the real estate economy bounced back in the post-COVID era.
Current State of The Californian Market
The California market remained highly competitive in mid-2022. Prices for a median home increased to $884,890 in April, exceeding the previous record of $849,080. In areas like Sacramento, limited supply and strong demand are driving up home prices. For instance, the cost of single-family homes in Sacramento increased by 16.63% in April 2022. According to expectations, the cost may grow by 5% in 2022.
Most investors and property buyers have used the two-year break to save funds. Thus, there has been a recent spike in purchasing properties with an increased demand for houses, especially as an investment. All the current trends may positively influence the real estate market, unlocking ways for good investment opportunities in real estate.
Based on the above research and the current market state, here is why we at Eagle Property Management think that investing in real estate post-COVID is still safer and a good idea.
1. The Built-To-Rent Market Is Trending
Built-to-rent refers to preparing a property for the rental market and leasing it to tenants for a steady income. According to a recent report, rental prices in Sacramento have increased by 10% over the last few years. Therefore, you need to consider the current demand for rentals in Sacramento and then decide about purchasing an investment property.
The current growth of rental prices in Sacramento is double the national average. For instance, the average rent for a two-bedroom apartment was $150, which has risen to $1,640. These statistics verify that renting has become lucrative in the last two years, making owning a rental a great business opportunity for investors.
2. Commercial Real Estate Is Recovering
As commercial properties faced complete shutdown during COVID-19, retail owners and commercial properties saw poor performance in the market. Offices became deserted as people lost their jobs or many preferred to work from home. However, the post-pandemic era has reversed the picture.
In Sacramento, vacancy rates for the retail sector are dropping to around 5.8%, which is much lower than the historical average. Many businesses and companies have started urging workers to return to office places, thus causing a steady demand for office spaces. Commercial properties have thus begun recovering from loss and are more likely to be a lucrative investment in the post-COVID era.
3. Rental Investment Offers Long-Term Benefits
Events impacting the global economy have occurred numerous times before, including the pandemic. However, we have managed to bounce back successfully every time. Volatility in the real estate market is temporary as it was before. Therefore, investors with long-term assets don’t have to worry. Despite high vacancy rates, strict housing laws, and eviction moratoriums, rental properties performed relatively well during the pandemic.
Since renters received direct aid and rental assistance, this type of investment continues to be appealing to professional investors. The rent prices, high market value, and lowest interest rates also support rental investment and fuel demand.
4. Higher Demand for Flexible Spaces
The demand for flexible spaces is increasing, causing new investors to focus on buying fully developed properties. It includes rooms for collaborations, virtual meeting spaces, and more. Existing investors are also changing the shape of their rental unit and redeveloping the offices to accommodate a hybrid working model that is less restrictive than before. Investing in such fully-equipped properties will ensure high market value, and the appreciation rate is still a good idea in the post-COVID period.
5. ESG Is a Top Priority
Sustainability and ESG (Environmental, Social, and Governance) are becoming top priorities for tenants and investors in the post-COVID era. These factors contribute to the existing properties and buildings’ overall ambiance and earning potential.
Especially in the commercial and retail sector, buyers and tenants consider spaces with energy efficiency, climate adaptation, and construction carbon emissions. Investing in such self-sufficient properties will surely increase technical development and earning potential, accelerating further growth in the coming year.
6. Demand for Smart Homes
The world is moving towards significant technological developments and integration in every sector. Therefore, people’s interest in high-tech systems used in building constructions, real estate, and property management. In the post-COVID era, tenants are more likely to prefer smart homes with touchless technology, digital security systems, intelligent air quality, and homes that maximize space utilization.
The real estate industry needs to realize the high demand and the necessity to reconceptualize products and their integration into modern homes. Therefore, investing in well-planned properties is still safer if you want high returns and appreciation value in the rental market.
There is no doubt that the emergence of COVID-19 has changed the real estate industry in several ways. It affected the profit margin of real estate investors and developers and made people less interested in buying properties for the time being. Despite these consequences, investing in real estate can be a favorable option now that the market has shown signs of getting back on track.
The only requirement is to decide on the rental type and how much you are ready to invest. If you have enough savings, investing them in a profit-making asset is wise. We suggest conducting detailed research to gain insight into Sacramento’s current market trends and rental prices.
You can either do it yourself or hire a property management company like Eagle Property Management. We are a leading management firm in Sacramento, serving the Greater Sacramento, Stockton, Fresno, Elk Grove, Roseville, and Rocklin Areas.
For more information, contact Eagle Property Management.