There are so many terms for “this time” we are facing. “This Crazy Time,” “The Shut Down,” “Pandemic,” etc. Humans do not shut down, we keep going. A writer friend of mine has labeled spring 2020, “The Great Pause.” I like that. The Pandemic is still a real threat, but we are a resilient species and we have not sat idle. During the Great Pause we have learned so much about each other, what we really want for ourselves, and about how to make bread. So much bread.
What does this mean for Real Estate? What have we learned? Here are some thoughts shared by Suzie Wilson of happierhome.net, on what we can expect during the transition.
As the United States – and the world – braces for a recession, you may be wondering if now is the time to move forward with your plans to buy a home for your family or as an investment. While the truth is that no one can 100% foresee the future, all signs point to the recession not having anywhere near the same impact as it did in 2008. So the question of whether to buy or not simply comes down to your comfort level and needs.
This is not like before
Those of us that remember the housing crash may be looking at the 2020 recession with fear and trepidation. But you must understand that 2008 was a unique situation, and it was caused by lending policies no longer allowed. With this in mind, you should know that housing prices are unlikely to drop dramatically, although, if you time things right, have your finances in order, and choose the right real estate professional, you may be able to snag a deal with mortgage rates staying so low.
Family home versus investment
It’s important to differentiate a family home versus an investment property. Although the former can help you build wealth, it’s best to look at your family home as an asset that meets your current needs. An investment property, by contrast, has one sole purpose: to earn money. For this reason, you need to know exactly what you want before you start your home search. In the Nashville area, the median home price sits at around $318,000, according to news station WKRN. That amount fits comfortably into many families’ budgets, but if you already own a home and plan to use your second property as an investment, your monthly mortgage is not your only consideration.
Fixer or turnkey
Regardless of your ultimate goal, when it comes to buying property, you have two main choices: to get a fixer upper/rehab or a turnkey house/condo that’s ready when you are. You are likely to get the best deal on a home that needs work, but you’ll need to evaluate the scope of these projects before moving forward. If renovation and construction far exceed the top value of the home in perfect shape, it may be best to move on.
At the very least, make sure that you are fundamentally familiar with the costs of renovations that might add value. A garage conversion is a perfect example. If you convert a garage to living space, you can potentially add thousands of dollars to the overall value of the home. Keep in mind, however, that it can cost you up to $21,249, according to HomeAdvisor, to get the job done.
Money may not come as easily
If you plan to move forward, remember that lenders may be a little more shy about approving loans right now. Before you apply for a mortgage, you’ll need to ensure that your credit is in top-notch shape. The higher your score, the more likely you are to qualify for a loan—particularly if your purchase is an investment, which is traditionally seen as riskier than a single family dwelling.
You need help
Making a $300,000 purchase isn’t something you should do alone. If you’re a first-time buyer or first-time investor, make sure to find an exceptional real estate partner. And if your ultimate goal is to earn a profit, hire a property or vacation rental management firm that can handle all of the day-to-day responsibilities, such as listing and marketing your property along with accounting and ensuring your permits are up-to-date.
Don’t let a recession keep you from enjoying life, moving forward with your family, or launching a career in real estate. Move forward with caution, and let your realtor guide you in the right direction. As long as you are financially secure and understand that there are inherent risks that go along with purchasing real estate, you will be no worse off today than you would have been had 2020 gone down a different path.