The start of 2020 was rough for real estate, thanks to the coronavirus pandemic. Many feared a housing market crash was on the way. However, things quickly took a turn as real estate became essential in many areas across the United States and economies slowly opened up. All of a sudden, the real estate market was one of the few sectors booming during COVID-19. Home sales went up as did home prices. Many investors quickly returned to the market, on the hunt for hot real estate investment opportunities.
With the recent FDA emergency use authorization of the COVID-19 vaccine, most experts predict that the US housing market will continue to thrive in 2021. So, it looks like now is a good time to invest in real estate. But you may be wondering how to invest in real estate in 2021. After all, you don’t want to put your money in investments that won’t work for you. No, you need to seek out the best real estate investment opportunities. Through our research, we have identified 3 great opportunities for this year:
Jump on These 3 Real Estate Investment Opportunities in 2021
Here are some of the real estate opportunities you should take advantage of in 2021:
#1. Long-Term Rental Properties
Currently, there is a shortage in housing inventory across the US and an increasing demand for homes for sale. This combination has led to a sharp rise in home prices. (Check out these stats from Realtor.com to see how inventory is dropping and prices are rising.)
With home prices rising, more and more first-time buyers are being priced out of their markets. A recent home affordability report revealed that condos and single-family homes were less affordable in 55% of housing markets. With home prices rising faster than earnings in the US, homeownership remains a pipe dream for many average workers.
This means that demand for long-term rentals will remain high all over the country. High demand means a large pool of tenants and the possibility of positive cash flow, making long-term rental properties one of the best real estate investment opportunities.
Related: Long-Term Rental Properties Are the Best Investments During a Pandemic
Just be sure to choose the right location for investing in this type of real estate. Looking at Mashvisor’s cash on cash return data, here are the best cities for traditional rental properties in 2021:
#1. Muncie, IN
- Median Property Price: $185,207
- Price per Square Foot: $85
- Price to Rent Ratio: 14
- Monthly Traditional Rental Income: $1,109
- Traditional Cash on Cash Return: 5.4%
#2. Saint Cloud, MN
- Median Property Price: $207,238
- Price per Square Foot: $120
- Price to Rent Ratio: 13
- Monthly Traditional Rental Income: $1,330
- Traditional Cash on Cash Return: 5.3%
#3. Mesquite, TX
- Median Property Price: $217,842
- Price per Square Foot: $134
- Price to Rent Ratio: 13
- Monthly Traditional Rental Income: $1,438
- Traditional Cash on Cash Return: 5.1%
#4. Independence, MO
- Median Property Price: $176,849
- Price per Square Foot: $105
- Price to Rent Ratio: 14
- Monthly Traditional Rental Income: $1,060
- Traditional Cash on Cash Return: 4.8%
#5. Livonia, MI
- Median Property Price: $260,551
- Price per Square Foot: $166
- Price to Rent Ratio: 13
- Monthly Traditional Rental Income: $1,673
- Traditional Cash on Cash Return: 4.8%
There is one issue investors need to keep in mind if they decide to look for real estate investment opportunities in this sector and that’s eviction moratoriums. Many lost their jobs or had their wages reduced during the coronavirus pandemic. According to the U.S Department of Labor, the unemployment rate rose as high as 15% in April 2020. As a result, the federal government issued an eviction moratorium to protect tenants and prevent the further spread of coronavirus. While this was good news for tenants, it was a nightmare for property owners who lost rental income. To date, this moratorium is expected to expire at the end of January. But there is always the possibility that it will be extended.
Still, long-term rentals deserve a spot on this list. Once a COVID-19 vaccine is rolled out and the economy begins to recover, demand for these rental properties will not waver but moratoriums will likely be a thing of the past. Just keep an eye on the developing situation and properly screen tenants to ensure you don’t suffer lost income.
#2. Airbnb Rental Properties
The short-term rental industry was one of the hardest hit by the COVID-19 pandemic. So it may surprise you to see Airbnbs on this list of the best real estate opportunities for 2021.
Due to the government restrictions and fear of infection, most people canceled upcoming trips. With rapidly dropping Airbnb occupancy rates, many hosts did not have a source of income when COVID-19 first hit. This forced some to change their Airbnb rental properties into long-term rentals.
Travel is expected to boom post-COVID-19.
However, things are starting to look up with the coronavirus vaccine and easing of travel restrictions. At the end of 2020, Mashvisor’s data showed that Airbnb occupancy rates were beginning to recover. Tired of being cooped up at home, people are now beginning to travel again, albeit with more caution. And once the vaccine is available to the general public, travel is likely to boom from pent up demand. 2021 will, therefore, be a good time to jump into Airbnb real estate investment opportunities.
Related: 3 Ways to Spot the Best Airbnb Investment Opportunities
These are some of the best cities to target for short-term rental properties, based on Mashvisor’s data (Just be sure to check on Airbnb regulations in each city before you buy an investment property!):
#1. San Angelo, TX
- Median Property Price: $348,191
- Price per Square Foot: $150
- Average Airbnb Daily Rate: $127
- Monthly Airbnb Rental Income: $3,476
- Airbnb Cash on Cash Return: 8.3%
- Airbnb Occupancy Rate: 71%
#2. Covington, GA
- Median Property Price: $250,605
- Average Airbnb Daily Rate: $158
- Monthly Airbnb Rental Income: $3,184
- Airbnb Cash on Cash Return: 7.2%
- Airbnb Occupancy Rate: 63%
#3. Greenville, NC
- Median Property Price: $263,633
- Price per Square Foot: $115
- Average Airbnb Daily Rate: $92
- Monthly Airbnb Rental Income: $2,463
- Airbnb Cash on Cash Return: 7.0%
- Airbnb Occupancy Rate: 70%
#4. Chesapeake, VA
- Median Property Price: $315,194
- Price per Square Foot: $161
- Average Airbnb Daily Rate: $166
- Monthly Airbnb Rental Income: $3,910
- Airbnb Cash on Cash Return: 6.8%
- Airbnb Occupancy Rate: 67%
#5. Eau Claire, WI
- Median Property Price: $267,207
- Price per Square Foot: $137
- Average Airbnb Daily Rate: $120
- Monthly Airbnb Rental Income: $2,612
- Airbnb Cash on Cash Return: 6.4%
- Airbnb Occupancy Rate: 67%
Fix and Flips
Because of the struggles brought about by COVID-19, the government also issued a mortgage forbearance under the CARES Act. This protected certain property owners that couldn’t make monthly payments from foreclosure. The expiry of this mortgage forbearance will result in a wave of foreclosed properties hitting the market.
These distressed properties will make for some of the best real estate investment opportunities when combined with the fix and flip strategy! This strategy involves buying a property below market value, renovating it, and then selling it for a profit. Though it can be quite risky, fix and flip can also be very rewarding.
Reliable data on the best cities to flip houses in 2021 is not in yet. However, ATTOM Data Solutions revealed that house flippers enjoyed the largest raw profits in the following zip codes:
#1. 06880 – Westport, CT ($1,129,500)
#2. 85255 – Scottsdale, AZ ($409,313)
#3. 20011 – Washington, DC ($382,000)
#4. 97035 – Lake Oswego, OR ($374,750)
#5. 90042 – Los Angeles, CA ($370,000)
Related: A 2021 Guide to Buying Distressed Properties
Conclusion
These are just a few of the best real estate investments to consider in 2021. Explore the different real estate investment opportunities and choose what works best for you.
Remember that, whatever path you choose, you still need to determine the most profitable real estate investment. You can do so using Mashvisor’s real estate investment tools. Using the investment property calculator, you can quickly evaluate real estate investment opportunities like Airbnbs and traditional rentals. You can find and analyze great deals on foreclosures, short sales, and bank-owned homes in the Mashvisor Property Marketplace. To get access to our real estate investment tools, click here to sign up for Mashvisor today and enjoy 15% off.
