In recent years, we have experienced significant growth in investment in the real estate field. The health crisis caused by the COVID19 made things change. The data show a freeze on investment transactions during March. A logical fear to invest has been created due to the financial uncertainty that has been generated.

If we analyse the impact of the COVID19 on the real estate sector, we can see that the offices and commercial premises field, which had a turnover of 1.9 billion euros in the last quarter, has been hit hard, as the crisis we are experiencing is mainly affecting companies and, in particular, the leisure and tourism sector.

As a result, hotels will suffer a drop in demand due to the fear generated by agglomerations and the possible restrictions on mobility between countries that are coming up to prevent outbreaks of COVID19. Likewise, office owners are facing downward rent negotiations in order to be able to withstand the economic impact of the crisis.

Therefore, the industry’s situation does not seem too favourable. However, if we want to invest, the alternatives to real estate investment are practically non-existent. Investment in startups will suffer a significant decline, due to the high risk involved in this type of investment and the economic consequences that companies will have to bear in 2020. The break in the financial markets and the reduction in interest rates will offer investors very low returns.

Although the outlook is not very promising, the investment alternatives to the real estate sector are looking less than attractive. The high volatility of the market and the reduction in interest rates will mean that we can expect insignificant returns.

Thus, from an investment point of view, we believe that the general trend will be to invest in the real estate sector or venture into M&A operations, taking advantage of the financial situation of some companies after the crisis.

Keys to investing during and after COVID19

That is why at Investius we want to give you our keys to continue investing in the real estate sector, despite everything. In this moment of uncertainty, from Investius we bet for:

  1. Flipping over investment on the residential sector reports high yields and give us an edge although the market prices fall. Thus, we work to present to our investors speculative transactions that offer around 30% of profitability in order to obtain a net profit, after the fall in prices, of 15% in less than 6 months, approximately.
  2. Fleeing, for the time being, from the offices and premises sector. The hardest blow is being dealt by the tertiary sector, i.e. offices, retail, hotels and restaurants. Surely, we could exclude the logistics industry from this fall. It seems to be holding up pretty well to the crisis although part of the distribution business is suffering from the lack of activity in ports and airports
  3. The current crisis may prove to be a great investment opportunity for large investors with financial possibilities as this situation will allow them to present much more aggressive offers and obtain real estate at a price well below the market. Turnkey projects for funds that learn to be flexible and optimize fixed costs to prepare for changes in demand and prices will be one of the keys for this type of investor.
  4. Tourist rentals. As the tourism sector recovers, if you travel, you would prefer renting an apartment rather than going to a hotel or hostel, because of the fear produced by the COVID19 and in order to reduce possible risks of getting infected, if there is a resurgence.

    Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.

Conclusions

In summary, taking advantage of the market price correction that will occur, diversifying investment through operations of lesser amount and having an eye for detecting the opportunities that will arise due to the crisis, is our recipe for investing in Real Estate during 2020.

It is already known, to rough seas, fishermen’s profit 🎣

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