Pandemic: The Truth About Investing In Real Estate In The New Economy
Suddenly all of those who have been denying a new dip was coming are realizing they were way wrong. Many are still lying to themselves about how deep this is going to go. What do you need to know about surviving and thriving as a real estate investor now?
It’s Going To Make 2008 Look Like A Vacation
This economic crisis is going to make 2008 look like a test trial. Expect the fall out from COVID-19 to be at least 2x as bad.
Fortunately, we can also take comfort in the fact that there are predictable patterns and cycles. The massive shift in daily life will really shake up some people.
They didn’t know life could change this much, so fast. Yet, we know that over the long term most real estate will keep growing. Today, the luxury NYC condos that were selling for $2M yesterday are probably worth less than a roll of toilet paper. Other parts of the market, where those quarantined have lots of yard to move around and maybe room to grow their own food are going to explode in value.
Schools and work may never be the same. In many cases that is a good thing. It is just speeding up the most to being more efficient.
A 70% drop in the stock market and some housing markets shouldn’t shock you.
Foreclosures
There will be some similarities from 2008. As in the best moves to make to get through. Yet, some things will be substantially different.
Don’t count on a flood of foreclosures. Governments are already banning foreclosures and evictions. If we don’t eradicate the virus fast, the foreclosure process will probably be years in the making.
So, be wary of spending all of your time and marketing money on foreclosures. Sellers aren’t going to buy the fact that they will lose their homes.
If you hold mortgage notes, the best thing you can do is to be proactive. Communicate with your borrowers. Give them a break on payments. Those will be the ones who stay and work things out with you.
However, there will be other types of distressed property sales. Especially among new developments and all of the owners of Airbnb properties who far overpaid and can’t rent their units. As well as speculators and flippers who need cash. Don’t forget condo owners in big cities who don’t want to be quarantined in small apartments in the middle of the chaos.
Landlords & Renters
Renters are going to stop performing. They are already being told Trump is going to send them bailout money, just like Obama in 2008.
Be proactive, talk to them, give them a break now. Or they are going to drag it out a lot longer than you think. When they do get out, you may have to lease at dramatically lower rates.
You can make it, if you work with them now, and keep tenants who will deliver cash flow again in a couple of months.
Wholesale Real Estate
Real estate wholesaling is the perfect investment strategy for this market. Get in, out and paid fast. Before the market can change on you. Use transactional funding to finance your deals, and hold onto your cash for now. They are already making runs on the banks and banks are limiting access to cash. You’ll have plenty of opportunities to invest it as asset prices get lower in the months and years ahead.
Just don’t stop marketing. This is your chance to expand market share.
