How My Real Estate Investing Has Changed Due To The Corona Virus
1. I’m Hesitant to Take on Additional Financing
With less capital to invest with, I see less of an ability to wield debt and than usual. I haven’t seen many specialists discuss it, but we are entering a credit crunch. As borrowers start reverting en masse and the lender’s ability to raise capital disappears, lenders are pulling back. Mortgage lenders make loans and sell them to wealthy and institutional investors on the open market. Though portfolio leaders typically raise their capital through institutional investors and crowdfunding, all have stopped investing. The financial world is waiting to see how this crisis will unfold with the many dangers of debt.
2. I’m No Longer Interested In Selling Property
After an experience with a dreadful tenant, I lost more money than I would have liked to. My property sits in a zone with tenant jurisdiction, so I no longer invest for that very reason. I planned to sell the property and say goodbye to my hometown where it sat. Initial data from the National Association of Realtors had shown that nearly 48% of realtors disclosed that their buyers looking for homes for sale had withdrawn, while only 16% of sellers had done so. I also won’t consider house-flipping for this exact reason. Otherwise speaking, the balance of supply and demand has suddenly and drastically tilted in favor of buyers. For now, I’m stuck with this property, expecting a buyer’s market for now until the economy recovers.
3. I Plan To Score Some Outstanding Deals
When this public health crisis passes and courts reopen, property owners will be able to enforce their leases again. Though, with the unemployment rate, landlords will still fight a higher risk of rent defaults. However, with thorough tenant screening, economically-healthy neighborhood choices, and insurance, landlords can avoid rent defaults. I will then resume investing with a vengeance. Investors will find many deal opportunities among sellers willing to accept a low offer in return for a fast and guaranteed sale. I plan on 2010-level discounts after all of this is over.
4. I’m Putting My New Rental Investments On Pause Until Courts Are Reopened
The process of eviction has been suspended, so landlords can no longer enforce lease contracts. An astounding ⅓ American renters defaulted on their rents in April of 2020. The only thing the struggling landlords can do about it is the default on their mortgages and almost nothing else. It’s all a financial game of dominoes. As it digresses, landlords won’t pay mortgages, tenants won’t pay their rent, banks begin to collapse, and we suddenly have no financial system, retirement accounts, or any kind of paper assets. In all, there is no sense in buying an investment that cannot reliably generate revenue. In the next few months, rental revenue will be very unreliable.
The world hasn’t seen a crisis like this since the early 1900s. That means greater risks for investors like myself, but it also means greater opportunities. I hear, “I wish I bought more property in early 2010 when prices were so low,” almost daily. To my fellow investors: Tighten your seatbelts, boost your savings rates, and abate as much cash as you can. In the months to come, you’ll find both real estate and stock deals that you’ll be obsessed with 10 years from now.