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What to consider if you’re looking for an investment property during COVID-19

Person being handed keys to house

Buying an investment property in a pandemic is a crazy idea, right? Well, maybe not.

Here’s five things to consider if you’re thinking about wading into the world of property investment.

1. Assess your investment options

The pandemic has significantly impacted financial markets, so it’s a good idea to understand what’s going on in the wider investment landscape.

With interest rates at historic lows, returns on bank deposits have been negatively impacted. But many investors still prefer the security of this investment in times of uncertainty.

The share market has been volatile throughout 2020, with the ASX 200 Index losing 36 per cent of its value between February and March as the COVID-19 pandemic spread.

While it has rebounded significantly since, investors can expect further fluctuations and dividend payments may also be impacted.

The Australian Securities and Investments Commission issued a warning to retail investors in May after noticing a substantial increase in day trading, describing it as “particularly dangerous, and likely to lead to heavy losses”.

The property sector has also been impacted during COVID-19.

However, CoreLogic says after an initial fall in turnover, the housing market has been relatively resilient, assisted by record low interest rates, government support and loan repayment holidays.

2. Stay informed of pandemic developments

The response to the pandemic is fluid and changes in government health and fiscal measures  could affect your investment decisions.

The extension of the JobKeeper and JobSeeker programs by the Australian Government has been welcomed by the property sector.

The Real Estate Institute of Australia says with 3.3 million rental properties across Australia, this announcement will ease stress and anxiety for tenants.

It is also possible that more properties might end up being listed for sale as government support is wound back and some homeowners find themselves facing increasing financial pressure.

Similarly, international and interstate border closures, business restrictions and social distancing measures may impact an area’s appeal and accessibility in the short to medium term.

3. Stress test your investment plan

Businesses plan for the worst-case scenario when they develop their strategies – and you need to as well.

It’s particularly important to understand the dynamics of the property market in different cities and regions at this time.

Monitor your target areas to see how they’ve been impacted by COVID-19 restrictions in terms of employment, tourism, business and social activity.

Assess whether you’d be able to cover your investment property costs if you lost your job, or if your tenant lost theirs.

When budgeting, work on the basis that state and federal government stimulus measures won’t be available forever and understand how that might affect your cash flows.

Factor in that if you had to sell your investment property, it may not happen immediately.

4. Bring in the experts

The Real Estate Institute of Australia describes property managers as “the unsung heroes of the pandemic” and says their work will be critical as restrictions on evictions are lifted.

A good property manager will screen rental applications for the best tenants, manage any tenant issues, ensure rent is paid on time and negotiate any maintenance requirements.

They are also experts in the property sector, staying up to date with market developments and legislative changes that may affect your investment.

Choosing a property manager could be a particularly wise investment in the current climate.

5. Plan for the long term

While current market conditions are daunting, it’s worth remembering that the pandemic will pass and the economy will recover.

There may be some hiccups but the fundamentals of the Australian housing market are strong, offering long-term rewards for many investors.

Find the home loan that's right for your investment property.