COVID-19 has changed the world as we know it. Everything from where we live and work to how we value and spend our time and interact with each other has dramatically shifted in the face of the challenges of the ongoing pandemic.

With changes as massive to our society as these, it's understandable that investment strategies would shift too. Two years into the pandemic, here's how I've altered my real estate investment strategy.

Person wearing mask inside apartment building.

Image source: Getty Images.

Hard assets rule

Prior to the pandemic, I primarily invested in mortgage notes. This meant I purchased an existing mortgage loan created by an individual or lending institution like a bank, stepping into the shoes of the bank and collecting the monthly mortgage payment from the borrower. In a normal market, this niche method of real estate investing can be a great way to generate passive income and earn above-average returns. But in today's inflationary environment it can be challenging to earn a strong enough return.

If inflation is at 8% and the interest rate on the mortgage charges 5% for 30 years, I lose money holding the loan. Since most residential mortgages are fixed, there's no way for me to combat the rising inflation rate. For that reason, I've shied away from mortgage note investing -- which includes mortgage real estate investment trusts (mREITs) -- and have instead turned to hard assets that can combat inflation.

Hard assets like real estate adjust with inflation. Values aren't fixed, which means as the cost of things increases, the cost of real estate increases with it. Properties that are leased on a short-term basis, like single-family rentals, multifamily properties, mobile homes, or self-storage facilities, also have the benefit of being able to combat rising inflation at a much faster rate than other types of commercial properties, which can have 5 to 30-year lease terms.

Long-term trends with defined futures

I'm also investing in real estate industries backed by long-term trends that can clearly outlive the short-term impacts of the pandemic. Industrial real estate, multifamily housing, single-family rental properties, self-storage, data centers, and communications infrastructure are all industries that have done extremely well in the pandemic and have a lot of drivers suggesting they will continue to do well long after the pandemic is gone.

I'm shying away from most asset classes that are still in a stage of uncertainty about their future. Industries like retail, hospitality, and office still have a long way to go before recovery is achieved. They are also industries that are susceptible to further negative impacts in the event of a recession as consumer spending lulls. While I don't think these industries are doomed, I do think they have more hardships ahead of them, and that is why I'm steering clear for now.

Person writing on paper in front of computer with charts.

Image source: Getty Images.

Doubling down on REITs

Real estate investment trusts (REITs) have become my preferred method for investing in real estate today. Not only are they far more accessible and cost-effective than trying to compete in today's red-hot real estate market, but they allow me to access a wider variety of industries backed by institutional-quality properties.

I've added significantly to my investment portfolio during the pandemic, and continue to do so today despite the market being down. I am personally on the hunt for rental properties in my local market to not only earn cash flow but benefit from the tax benefits and potential appreciation of owning real property. However, that is definitely a challenging feat in today's high-priced and highly competitive market.

I am practicing patience when it comes to buying property and am making sure I'm not reacting to fears or market pressures. The quality of the company and the performance of the property or portfolio is what's guiding my buying decisions with a long-term outlook. While there's certainly a fair share of challenges and unknowns about where the market is headed, there is still a lot of opportunity for investors.