Back to the Basics: How to Invest In Uncertain Times

COVID-19 and Real Estate

By Matt McFarland, Vice President, Kay Properties & Investments

All investors know and understand that the economy goes through periods of expansion and contraction.  The real estate markets behave and exist in cycles – years of growth followed by years of regression.  Over the last 10 years, the United States has experienced phenomenal growth when it comes to real estate.  We now find ourselves in a very interesting time in the cycle, asking the same question that we have asked the entire time along the way – what is the best way to invest in this market?  

The truth is no one truly knows how or when the next correction will come to be; no one knows the severity of the correction and exactly how long it will last.  To this, we remain cautious in our approach to investing, paying extra careful attention to macroeconomic trends as well as market-specific trends.  

When it comes to investing in real estate, the most basic tenant of “location, location, location” is foundational to that investment’s success.  Is the property located on the corner of main and main, or is it off the beaten path?  How does this property compare to other properties in the same market?  hat is the properties curb appeal? Who is my targeted renting demographic and what are the trends in this market specifically that position this property for success?  

In addition to and beyond the specific investment itself, diversification* is a fundamental aspect for defensively positioning one’s investment portfolio.  Diversification is an element that many investors seek across their investment portfolios and proves to be exceptionally valuable in difficult and uncertain times in our economy.  At Kay Properties, we take this imperative approach to real estate investing.  Many of our investors are looking to defensively position their real estate investments and one of the easiest ways they accomplish this goal is through diversification.  Of course, diversification does not guarantee against losses, however, it can help eliminate concentration risk and potentially mitigate more significant loss were one to concentrate more heavily into an investment that was adversely affected in the future.  

Even beyond diversification, holding power in an investment is vitally important to withstand any trying times in the future.  When it comes to real estate, the best way to maintain holding power is through eliminating debt when possible.  By taking a third party lender out of the equation, one is typically able to weather and work through any difficulties that come up in the future. 

For more information on the 1031 exchange process and how investors utilize DSTs to diversify and prepare for the future, please reach out to your Kay Properties Registered Representative or visit www.kpi1031.com for more resources.  

*Diversification does not guarantee profits or protect against losses.