Benefits of buying and selling commercial real estate during COVID-19
Millions of people around the world are terrified of this global pandemic.
As the COVID-19 crisis is unfolding in every part of the world including the United States of America, and taking the number of sufferers higher and higher, there are many questions that are coming up about the investment in commercial real estate. How soon will the situation of the commercial real estate market get back to normal? Will I make money or lose money if I invest at this time of crisis? How much impact does it have on the financial markets globally? Will it impact the market of real estate in the U.S.?
Everyone is worried about the immediate impact and the impact in the long run of COVID-19 on their business but no one really knows when it will happen. Many people are not prepared for this scenario which is actually so challenging. They are nervous and confused about how to handle the situation in the best possible way. So, the best thing to do at this time is to go back to history and see the reaction of the people all around the world in the economic crisis brought by similar pandemics. See how people managed at those times.
How is buying and selling commercial real estate during COVID-19 beneficial?
Despite predicting the terrible fate for many industries due to the spread of COVID-19, there are still five reasons why buying and selling commercial real estate should look like a comforting prospect. Here’s how buying and selling commercial real estate during COVID-19 is going to benefit you.
1. On 9th March 2020, treasury rates dropped to the lowest rate in history. It was 0.569%. So, this clearly indicates investing in real estate with significantly lower interest rates is the best investment anybody can do at this time. Please refer to ‘The Federal Reserve Bank’ website for more information on treasury rates.
2. Since there is a recession in the economy all over the world, people are worried about their investments. People who already own commercial real estate are ready to sell it out even at a lower price just for the sake of selling it and getting money instead. This would help them with the cash flow which is a necessity in this hour of crisis. This low price is beneficial for the people who were looking for an investment in commercial real estate but could not do it because of the high prices which they could not afford before. The best hedge against is to protect yourself and buy real estate. We have seen in the past property values have doubled and tripled in 10 years.
3. In many states of The U.S., real estate is being considered as an essential thing as they think that this would help in keeping the economy going. So, in a way, the business of buying and selling commercial real estate is still going on. This would also minimize the chances of the market crashing in the near future. When most of the businesses and services have come to a halt, this is still going on.
4. Another benefit of selling at this time when COVID-19 has spread in every country is that because this is not something that will end up soon, no one knows for how long it will go and no one has even the slightest idea that how worse it can be so it is better to sell off your commercial real estate before the recession leads to a further drop down in the price. Some stocks have plunged more than 30% down in one month and traders are also leaving the equity market and running towards CRE as it seems more logical to invest in a lower risk type of investment.
5. With the growing spread of COVID-19 across the US, everyone is preferring work from home so that they do not come in contact with many people. Because of this, office space demand has almost come to an end. This is what we call a tenant’s market. In such times, if there is a tenant hunting for industrial flex space, there is a high chance you can ask for favourable prices.
Although New York has seen a great drop in the inventory but prices in real estate have not gone down. In New York, the prices of properties may stay stable so it is better to sell off the property that you own. By doing this, you would get cash in hand (or liquidity) or you may also invest this amount in a property where the prices are less at this time.
Bess Freedman, CEO of Brown Harris Stevens says “People still have the desire to purchase and sell. They are just waiting for when they can.”
This may not be a very favourable time for sellers as they will not get the best price possible. However, in this panic situation, the hope that there is still an urge to buy and invest in commercial real estate, sellers can get the money which is a crunch for many at the moment. The silver lining for buyers is that they can get their terms and prices agreed due to unpredictability.
After all, real estate is a game that is played seeing the long term tenure. Investors who are interested in buying are told the same story and they are reminded that this is a long term plan. The uncertainties in the next six months is what everyone knows. The time to come is going to be tough for everyone and commercial real estate would be no exception. Realistically when the interest rate goes down by 2% on a mortgage of $1,000,000 you save $20,000 per year and an average person keeps the property for 7 to 10 years. Here is your gain of $140,000 to $200,000. Don’t miss the concept.
Further at FSBO, we are doing our part to share in your financial wealth by helping you avoiding hefty fees that people are used to paying while buying or selling real estate or businesses. So please visit us at www.fsbocommercials.com