They say location is everything when it comes to buying profitable investment properties, but what qualifies as a good location depends on many factors. For instance, some people want to be surrounded by nature far from the city, while others want to be walking distance from busy downtown shops.
Under tough economic circumstances, however, location preferences are determined by affordability. In the wake of the COVID-19 pandemic, people are losing their income fast and unemployment will soon run out. People who can’t work from home will soon be looking for housing in areas that are more affordable.
Many landlords are struggling to pay their expenses since they’re not generating their expected rental income. In response, some landlords are lowering rent prices and some cities are becoming more affordable than others. Austin, Texas is one of those cities.
Austin rents are falling, but investment opportunity is rising
All over the United States, rents are dropping thanks to the coronavirus pandemic. People are out of work and rent has become difficult to afford. Some landlords have no choice but to lower rents to keep and/or get tenants.
Some areas– like Austin, Texas – have seen rent prices fall quickly, while other cities aren’t far behind. According to Culture Map Austin, right before the pandemic hit, rents in Austin were rising. By June, the average rent for a one-bedroom dropped by 0.31% to $1,291 per month.
Although rent prices are dropping in Austin, the opportunity to buy property may soon rise. Landlords who can’t cover their losses throughout eviction moratoriums or take a big hit from unpaid rent will have no choice but to sell. Their loss can be your gain.
People will soon be moving to affordable areas like Austin
Renters have few choices now that the economy has taken a sharp downturn. They can either be homeless, move in with friends or family, or move to a more affordable area, even if it means moving to another state. Owning property in cities with falling rents like Austin can make you one of the few landlords generating a profit in these hard times.
If you don’t live in Texas, consider investing out-of-state. Investing out-of-state on your own can be challenging, so you’ll want to lawyer up and hire a property management company to handle all of your landlord duties as per state landlord laws. For example, Austin property management experts at Green Residential handle everything for landlords including tenant screening, rent collection, repairs and maintenance, and legal processes like evictions.
Unemployed tenants have few options to stay where they are
Although state governments have issued moratoriums on evictions, they are not permanent. Some landlords have also benefited from a moratorium on mortgages, but like rent, missed payments must be paid back. Both landlords and tenants are in the same boat – without income, they can’t pay their bills.
Tenants in New York City, for example, are getting behind in rent by tens of thousands of dollars. For instance, one NYC household of five was splitting a $4,000 per month lease. Thanks to layoffs in the restaurant industry, they’re now $20,000 behind in rent and only one person in the household is employed.
People who can work remotely aren’t struggling like people who can’t work from home. For instance, everyone working in the food service industry is affected even though many establishments are offering takeout. Without the ability to reopen to full capacity for dining in, many restaurants have had to let workers go. To survive, many will be flocking to cities with affordable rents.
Buy affordable investment property in Austin
If you can buy investment property in Austin and set rents to an affordable rate, you’re more likely to see your units fill up quickly with people who are working part-time or who can afford to pay rent with their unemployment checks.
The key is to find property at a low price so the rent you collect will cover the mortgage and other expenses. You won’t be generating a massive profit right now, but any profit is better than none. Also, when the economy rebounds, rents will start to rise and eventually the market will return to normal.
Invest with the future in mind
There will always be investors who can afford to take a financial hit through this economic crisis. If that’s not you, you may want to consider selling your existing properties while you can and buying cheaper property elsewhere. Doing this will keep you from drowning in debt today and in the future, when the economy bounces back, you’ll have a reliable source of income.