We can’t discuss the near future without addressing our apocalyptic present. Coronavirus has hit every US industry, and real estate is no exception. Unfortunately for real estate investors, buyers, and sellers, the December and January real estate optimism was very short-lived. As COVID-19 cases began to rise, so did uncertainty in the industry. There have been numerous speculations and concerns with regards to where the housing market is headed in 2021. And while we’re slowly witnessing conditions unfold, we’re still unsure exactly how the market will be affected. But we can make some educated guesses. In this article, we will delve into some predictions for the 2021 US real estate market. So stick around to find out if owning a rental property by next year will be worth it.
What Do We Know Now?
Before anything, it’s important to lay out the fundamentals of what we know at this point in time in relation to the US housing market 2021. We’re outlining predictions based on the information we have today. Of course, data is continuously changing, so make sure to stay up to date on the most recent reports.
Summer and spring are usually hot months for real estate, but they haven’t been in 2020. According to a Zillow report, housing prices are expected to take a 2-3% dip by the end of this year. But, based on their weekly report, data shows listing prices are on a consistent 0.3% increase, while for-sale inventory falls as sellers pull their listings. And existing home sales have seen a 21% surge in June, a record high. So some experts are foreseeing a recovery in housing prices and inventory by Q3 of 2021.
What does this tell us? The real estate market is bound to recover, it always has. What’s great about the housing market is that property will always be in demand. And while other industries risk failing or disappearing, real estate doesn’t.
Which takes us to our next section – why owning investment property in 2021 is worth it.
The Basic Benefits of Owning a Rental Property
First of all, let’s go over the basic benefits of investing in rental properties. If you buy a rental property before 2021, you’re sure to benefit from the following:
- Generating cash flow
This is why most real estate investors ultimately get into the business, isn’t it? Rental properties are a great way to generate cash flow. And while it’s not the most fitting of statements at the moment, real estate is a stable investment when it comes to cash flow. Just be sure not to let the hidden costs of owning a rental property catch you by surprise and put a damper on your cash flow. Positive cash flow can also lead to a high return on investment (ROI) for rental properties, another perk of being a landlord.
- Ability to make passive income
Owning a rental property is one way to generate passive income – income you don’t actively work for. With enough cash flow, you can pay to hire a professional property manager to take care of all the work for you.
- Reaping the tax benefits
Owning an income property allows you to reap tax benefits on mortgage interest, repairs, accounting services, depreciation, legal fees, insurance, among other things.
You can sell the investment property down the line and make more money off of appreciation. Make sure you do your research on the investment property for sale and the location beforehand to make sure there’s appreciation potential.
Reasons Why Owning a Rental Property by 2021 Is Worth It:
Low mortgage rates
During the last week of July, mortgage rates hit a record low of 2.99% for a 30-year fixed mortgage. This comes at a time when concern about the second wave of Coronavirus is rising. Rates have flit around 3.00% and are expected to continue to do so well into the end of the year. Mortgage rates are tied to current market conditions, so as long as uncertainty lingers, mortgage rates will continue to be this low. The current mortgage rates in 2020 are favorable for real estate investors and home buyers alike. So if you’re considering owning a rental property, now is the time to make your move and get a property before 2021. A mortgage could not have come at a better rate!
The real estate market will recover
As indicated above, the real estate market is expected to recover, albeit slowly. Since we’ll eventually go back to normal post-pandemic, why not opt for owning a rental property now while mortgage rates are low?
Not even a global pandemic will stop the move
While listing numbers have dwindled, people have continued to move and search for rental property. As Ben Snow, a Boston-based real estate agent articulates,
If people need to move, they need to move.
Real estate agents nationwide state that the rental market continued to be active, even amid current conditions. While many people opted to move back to their home-towns, others continued to rent property elsewhere. In fact, showings and open houses for buyers and renters have not come to a halt, they’ve just shifted to virtual tours – a trend that could become our “new normal.” In some locations such as the Washington D.C. housing market where restrictions are more lenient, people can still go to in-person showings if the unit is vacant.
In short: demand for rental properties will still exist in 2021, and so will the opportunities that come with becoming a rental property owner.
The Bottom Line
While it’s still early to be able to accurately predict what the 2021 US housing market will look like, we can make educated decisions with the information at hand. So far, the trends are telling us that buying a rental property mid-pandemic can prove to be a smart endeavor considering what we know about 2021. Our advice? Aim to buy a rental property by the end of 2020, and become a landlord by 2021. This way, you’ll have time to research as well as plan your rental strategy for next year. In the meantime, continue to read the latest news on the real estate market.
Finally, before buying rental property or owning an Airbnb, make sure you conduct rental property analysis using Mashvisor. Yes, even during a global pandemic, our rental property calculator can provide you with needed data on cash on cash return, cost analysis, and rate of return on a rental property. To start looking for and analyzing the best rental properties in your city and neighborhood of choice, click here.