How to Make Money in a Post-COVID Real Estate Market – The Motley Fool

It’s been a long time coming, but there is hope that we are entering the endemic stage of the coronavirus. The lifting of mask mandates in many areas is just one of the many indications that life is back to normal — though it’s certainly a new normal.

Many sectors, notably office, retail, and hospitality, took a hit during the pandemic. There are signs of recovery, though the stock market is experiencing more than its fair share of ups and downs. If it’s too much for you to stomach, it’s time to diversify your portfolio.

While real estate investing carries its own fair share of risk, there are some smart moves that can pay off as we head into a post-pandemic real estate market. Here are four of them. 

A large warehouse with employees moving boxes of inventory.

Image source: Getty Images.

1. Add REITs to your portfolio

Real estate investment trusts (REITs) are the go-to solution for investors looking to diversify their portfolios without becoming landlords. REITs own and operate properties in a variety of sectors, which include everything from healthcare to hospitality to residential

There are two sectors in particular to keep an eye on post-pandemic: data center REITs and industrial REITs. The need for data and networking solutions has increased, especially with the shift to remote and hybrid workforces. So has the need for industrial and warehouse space to build, store, and move all the products and supplies we purchase in our ever-increasing reliance on online shopping. 

Both types of REITs have been pegged as recession-proof because tenant contracts tend to be long term — some industrial leases go up to 25 years — and ensure a steady stream of revenue. And since REITs are required to pay out 90% of their taxable income to shareholders, those dividends can add up quite nicely, depending on your investment strategy. 

2. Rent out your vacation home

Airlines have lifted their in-air mask mandates, so many feel freer to move about the cabin — and the country. In fact, the New York Times reported that the World Travel & Tourism Council has predicted U.S. tourism will return to pre-pandemic levels this year, to the tune of a $2 trillion boost to the economy.

Want in on that windfall? Put out the welcome mat for renters at your vacation home. Yes, you deserve some time away, too, but if you’re not planning to use your vacation home for the entire season, list it on a vacation site like Airbnb or VRBO (owned by Expedia Group) for premium rates now that vacation plans are back in full swing.

3. Invest in multifamily real estate

High property values coupled with rising interest rates have caused many would-be homebuyers to remain renters. Apartment List reports that rents are up 17.1% year over year. Investing in multifamily properties offers multiple streams of income thanks to more than one tenant living under the same roof — be it anything from a two-family home to a multiunit apartment complex.

If you don’t have the cash to buy a multifamily home, you could look into options for turning your primary home into one. Whether you renovate the basement as a legal apartment, build an apartment over the garage, or add a backyard cottage, accessory dwelling units (ADUs) represent an investment opportunity as well as a solution to the housing crunch. 

4. Sell your home while the market is still hot

The high demand for a low housing supply continues, which has driven property values through the proverbial roof. The median price is currently $375,300, up 15% from last year, according to the National Association of Realtors (NAR). Though buyer demand has slipped a tad, with sales down 2.7% in March, NAR reports, it’s still an excellent time to take advantage of a real estate market that’s very much in the seller’s court.

If you’ve owned a property for a while and decide to sell now, you stand to make a tidy profit. But if it’s your primary home and you’re looking to move, understand that most of that profit could be eaten up by a new home purchase, unless you’re downsizing or moving to an area of the country with a lower cost of living. 

Whether you want to be a landlord and own multiple properties or take a more passive investing approach and add REITs to your stock portfolio, real estate investing offers lucrative opportunities in a post-COVID market.

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