The COVID-19 pandemic has impacted nearly every aspect of the housing market including and perhaps especially what has traditionally been the 2nd home or property investment market. This, however, could be a story of opportunity for investing.
It sounds like strange timing to even consider buying an investment property during a pandemic but the far-reaching impact of the public health crisis has revealed more options than you might expect.
Let’s look at the opportunities. There is a whole economy built around secondary and vacation markets. Think about people who amassed numerous properties marketed through Airbnb. It’s easy to take on debt when you have someone else paying your mortgage every month.. but now some homeowners are finding a tough time paying the bills without anyone to rent it.
Our mental psyche is another factor in the search for why more people want to find that beach or mountain dream home. As experts talk about the possibility of another surge in the virus later this year and families fear we will once again be limited to the walls of our home, the value of having a second place to go seems more important now. The value of having a beautiful place to go outside seems equally as crucial. Science backs up the mental health benefits of coastal living. It’s much more tolerable if you are social distancing with a beautiful view!
Outbreak restrictions coupled with the economic fallout of the shutdown have decreased homebuyer demand in areas of service industry centered economies. Inventory has also been affected. Homeowners aren’t moving or selling their primary homes unless necessary. However, sellers are motivated to shed secondary properties.
To provide some perspective; In Charlotte, there has been an on-going low inventory problem that continues through the pandemic. In addition, there seems to be more out of state buyers moving to Charlotte, perhaps fleeing the higher populated cities. Just beyond Charlotte’s city bounds, the prices do start to go down and inventory is more abundant.
According to Fannie Mae’s Home Purchase Sentiment Index, over half of Americans still say it’s a good time to buy a home.
Before you decide to take the leap there are a few things to consider including some additional expenses in relation to a vacation home.
- Mandatory flood insurance: Rising sea levels and climate change continue to be a real threat to coastal communities. Make sure you fully assess the risk.
- Higher property taxes
- Management costs if you plan to rent it out part of the time.
- You may need to hire more people including engineers, geological inspectors.
- Research the policies of local coastal commissions regarding mitigation and natural disasters. Do they support protecting beachfront homes or allowing natural erosion? What about local government policies impacting short term rentals?
If you are able to go see available properties yourself make sure to take appropriate safety measures including driving in separate cars from your agent and wearing masks.
Virtual tours, which have been on the rise since the lockdowns started, are a good option for taking a first look and helping you narrow down which homes you are most serious about.
Natural habitat vacations are more popular than ever. The right property under the right conditions can make them a lucrative investment. As with any investment, there are risks. If we’ve learned anything from this pandemic it’s that life is uncertain. Choosing an investment depends in part on your tolerance for the risk involved.
We recommend approaching the process objectively and being diligent in your research.