Real estate prices have been rising and the population of renters have been growing. But the thought of investing in real estate as an investment property has become a little riskier. As our economy transforms from a remote work and remote learning environment, what does that say about where we should live? If renters have the option to work or live anywhere they choose, how should that affect the location of real estate to buy and rent? After all, real estate is all about “Location, Location, Location”.
One of the most important aspects of where a person chooses to live is their workplace. Most people will choose to live close to their work because of the ease and convenience of getting to work. As real estate prices have risen astronomically over the last couple of decades, one trend we have seen is many people moving further out to the exurbs away from urban centers where property and rent may be cheaper but the commute has grown longer. However, most jobs were still located in the major metropolitan cities.
With families with kids, choosing a home in a good school district was also an important factor in deciding where to live. Instead of paying for expensive private schools, school districts that have a high rating would be able to offer their students a great education and prepare them for college. When these students did go to college, they would move out to live on campus and later live off campus close to the college or university.
By understanding these inputs to the decision of where people chose to live, it opened up opportunities for investors to find rental real estate and partake in the residential real estate market. This past decade saw many luxury apartment buildings being built in the major metropolitan cities because the high salary jobs were located there. With traffic into the major cities during rush hour being so terrible, it made sense for people to live in these luxury apartments and either walk, bike, or take a short commute with public transportation to work. Therefore, buying a home near a major metropolitan city and renting it out to those that work close by has been rewarding.
Buying homes in the suburbs with good school districts was another way to locate rental properties. Buying a decent size home that would be adequate for a family while their children complete there middle and senior high school education and then rent it out also made sense. Additionally, buying properties near major universities and renting them out to college students has also been a profitable strategy. As these students complete their education, they move out and the process of renting to new students repeats.
Now with Covid-19, everything has been turned upside-down. Those who work in high salaried and high skill jobs have the option to work remotely. So now they do not need to live near their workplace and can choose anywhere to live without having to worry about their daily commutes. Where will they choose to live? The answer seems to be anywhere and everywhere they please. And since universities are being taught remotely, students no longer need to live on campus or near campus and will probably continue to live with their parents wherever their parents decide to live.
The formula for choosing where to invest in rental property has changed. Since people have the choice to choose any place their heart desires, and everybody has different tastes, interests, and ideas, it makes rental properties more difficult to select. It used to be easier to determine that “Location, Location, Location”, but after Covid-19, where it is safer to be away from everybody, people will scatter and the sure bet real estate investments aren’t so certain anymore. With this uncertainty comes greater risks. If remote work and education continue after the Covid-19 pandemic has resolved, then this change will remain and we will have to find a new model for investing in rental real estate.