I wanted to address some of the questions and concerns I’ve been getting recently about the effect the Coronavirus is going to have on real estate investors and their businesses. I’ve talked with a number of investors recently and they are worried. Today, I have some survival tips for real estate investors during this crisis.
Real Estate is Always Changing
As I look back over the more than two decades I have been in this business, real estate has always been cyclical. It can be affected by any number of things going on in the world. I’ve been in this business long enough to have seen the effects of 9-11, the real estate crash of 2008 and everything in between.
The reality of it is that real estate is bound to change if you stay in this business long enough. You may need to adjust the way you do business or the strategies you are currently using, but you can make money in real estate in any market. You just may have to do it differently.
Real estate is always impacted by world events. In this case, I think it is too soon to know for sure what the actual impact of the Coronavirus will be on investors. There is no doubt that some investors will be negatively impacted in the short term. However, I believe that there will also be a lot of opportunities for other investors that weren’t previously there. Interest rates are still so low. This alone will make it easier for the economy to rebound.
If we can all just hang in there a little bit, things will eventually get back to normal. Real estate closings are still happening here in my area so agents and investors who had deals in the works will be able to close those deals.
How are other people and businesses affected?
Let’s Talk about Buyers and Sellers
Buyers and sellers are in a holding pattern right now. On one hand, we have buyers who aren’t interested in looking at properties during the quarantine which means sellers won’t be able to sell. Folks selling the homes that they live in don’t want potentially sick people in their homes. Those sellers that need to sell fast will be the most negatively impacted.
This would include people who had lost their jobs prior to this event, people experiencing job transfers, or those that for some other reason need to sell right away. They will also be the most motivated to accept a lower offer. Anyone trying to sell their property now will likely face longer days on the market. House sales will decline at least in the short-term; however, they may not be affected in the long term. We just don’t know the answer to this one yet.
For sellers currently facing foreclosure who have a Federally-backed mortgage, that process has been suspended for 60 days for Fannie Mae and Freddie Mac. Financial institutions will have the resources to weather this for a few months so this should only be a short term problem for them.
Landlords will definitely be affected during this period of time, especially those with only a few properties. There is a Federal ban on evictions and set outs for at least a month which will likely be extended. This could pose serious financial hardships for buy and hold investors.
If their tenants stop paying rent but they themselves have mortgage payments due, they may not have the cash reserves to make those payments for very long. Because of this, some of these same investors may decide to get out of the business. This will present an opportunity to buy and hold investors who have the cash to purchase good deals.
When this happened in 2008, investors referred to this as the “thinning of the herd.” The number of active investors in my local REIA (Real Estate Investors Association) declined by 50%. A lot of investors simply went out of business.
Rehabbers are just as concerned. They are worried that their newly renovated properties will take longer than normal to sell, and that is a valid concern. Many of them are reluctant to put additional properties under contract while they wait for sales to happen. Once again, this is an opportunity for cash buyers who can afford longer holding times.
Probates: A Golden Opportunity
For investors who have cash on hand, this is a great time to look at a vacant property. One of the best sources of vacant properties is probates. This is the absolute perfect time to jump into this niche. If you think about how probate works, properties in estates must be sold in order to pay the creditors before the heirs get what they have inherited. If this drags on for months, you will see some of these sellers become even more motivated than they were before.
If you want to learn more about probates, you can find a lot of information on the blog, or check out my course Probate Investing Simplified.
Questions and Concerns- Survival Tips for Real Estate Investors
I have gotten a lot of questions from concerned investors, and I wanted to share some of those with you.
One that I have been asked numerous times is should you completely stop your marketing campaigns?
My answer is no, you shouldn’t. However, you may want to do two things:
- You might want to delay sending your regular direct mail pieces for a few weeks until the quarantine is lifted. You are not going to be able to look at houses in most cases unless they are vacant.
- Instead of sending your regular “we buy houses” direct mail pieces, put together a quick newsletter and send that out. This will help you stay top of mind when folks are finally ready to sell. This also allows you to continue building the “know, like and trust factor” with sellers while you weather this difficult time.
What can you put in your newsletter? How about a list of spring maintenance tips? Or, you can put together a list of resources for people who need help with the rent and other expenses while they are temporarily unemployed. You can find these easily on the internet.
If this situation continues so that a couple of weeks turns into a month (or longer), this is still marketing. As an added bonus, you will be simultaneously building your brand with your alternative marketing methods.
Here are Some Other Facts
- Investors who have cash reserves will be presented with a great opportunity in the upcoming months. There will be sellers who become very motivated, especially if this drags on longer than expected. Sadly, some buy and hold investors will see their cash flow dwindle, and many will not be able to weather the storm.
- If you don’t have access to cash but you have assets you can liquidate to invest in real estate, you will also be in a great position to buy property at a discount.
- This brings me to something I talk about all the time, and that is follow-up.
Follow-up on cold leads, old leads, and folks who previously said no to your offer. Remember that time and circumstances change all things. The seller who said no to your offer before may suddenly become very motivated. 80% of your deals will ultimately come from follow up. This is a golden opportunity to follow up with these people. It should probably be your #1 activity at this time.
- Businesses that are lean will have a much better chance of survival. Look at your business to see where you can cut costs. Be proactive and do this before you are in a state of crisis. One place you shouldn’t make big cuts is in your marketing. Remember, with marketing there is a long runway. Marketing takes time to build momentum. If you stop marketing, you will have to start all over to build momentum.
Final Survival Tips for Investors
This is no doubt a challenging time for all of us. Real estate always rebounds so that is what I want you to hold onto. Things will get better.
Here are some things you should do:
- Keep marketing, stay in touch with your business contacts, and use this time to work on your business.
- Build systems and create processes in your business where needed and improve existing systems that are already in place. Ask yourself, what’s not working?
- Catch up on bookkeeping and other tasks that continually get put aside
- Look at your marketing plan. Things have no doubt changed since you created it for this year. What do you need to do differently? Do you need to pivot? Make changes that will set you up for success.
- Read that business book you keep putting aside or finish that course you signed up for but never finished because you haven’t had time.
Get Your Quick Start Marketing Plan Template
This is a great time to take stock and come back stronger than before. Remember that you can get a copy of my Quick Start Marketing Plan Template on the blog completely free.
I hope this has given you a few tips you can put into action now while things seem to be a little bit unsettled. Use this time to work ON your business while you’re waiting to get back to working IN your business.
Sharon Vornholt is the owner of Innovative Property Solutions in Louisville, KY. She owned and operated a successful home inspection business for 17 years, while also investing part-time for over a decade. Sharon was originally a rehabber and a buy and hold landlord. When the market crashed in 2008, she became an “accidental wholesaler. Today her passion is in teaching others how to stand out in a crowded field. Sharon is best known as a marketing and branding expert for real estate investors, and for her expertise in probate investing. She has helped hundreds of people refine their brand and create customized marketing plans that work. Sharon is also the go-to person if you want to know how to succeed in the probate niche.
Sharon is the creator of the Louisville Gals Real Estate Blog, the popular podcast “Let’s Talk Real Estate Investing”, and Probate Investing Simplified. Sharon hosts several live events each year and is a regular speaker at other events across the country. Louisville Gals Real Estate. Blog: https://Louisvillegalsrealestateblog.com
Probate Investing Simplified: https://probateinvestingsimplified.com
Let’s Talk Real Estate Investing Podcast :https://itunes.apple.com/us/podcast/sharon-vornholt-lets-talk/id784109559?mt=2. For more information Email Sharon@sharonvornholt.com.