Wow, how things have changed, fast! If you are still investing, I would love to hear how you are adapting and what you see for the future. I’ll start with some of the Covid changes we’ve already made.
NOTE: Much of what I share is what we are already experiencing and changing in our own business. Much is based on our 2008-2010 real estate investment experience.
- Do not stop. Historically, real estate always works, you simply need to adapt to changes in the market. Therefore:
- stay flexible
- know and secure financing
- Stay involved in online networking groups, both local and national, to stay on top of the changes you need to know about as they happen.
- We have increased our marketing. Why?
- People are going to need money, which means selling their personal or family property. We want to be available when a need arises to offer whatever help we can.
- Fewer investors are already buying out of fear of the future and lack of funding, so there hasn’t been a better time to be in the market in years!
- Inform yourself. What we have seen recently is exactly what we experienced in 2006-2007; everyone was getting into real estate investing because it was so easy. As business becomes more difficult now, those who are prepared, informed and educated have an incredible opportunity.
- Buy for less. We all know that the future holds uncertainty. Price values can go down a lot in the coming months / years. Sellers know this too, so many will want to sell sooner rather than later. They also realize that you are taking their risk when you buy, so they understand when you are offering less than they expect. And, it is true, you are taking a risk. When bidding, make sure it’s a price you can live with if the value falls in the next 3-6 months.
- Properties are still selling wellSo buy properties that you can convert quickly, this is not the time to buy big rehab!
- Buy and sell virtually. This is the perfect time to learn how to transition your business to virtual. We are currently doing due diligence online, asking permission to walk around the property and take photos, then we ask the seller to send us photos of the interior or to leave the property while we enter and take photos. Sellers appreciate our concern for their well-being. We are requiring that you allow a tour of the property prior to closing to ensure your own photos do not omit something we need to know.
- Prepare for longer days on the market when selling. Watch the days at your local property’s market to get an idea of what to expect. As lenders begin to run out and / or increase their borrowing requirements, there will be fewer qualified buyers and both the sale and closing will take longer.
- Expect Lenders to Tighten Borrowing Requirements.
- We have already seen private lenders stop lending out of fear of future risks and the need to keep their funds safe for themselves.
- Many hard money lenders have stopped lending altogether because they were bundling loans and selling them. Those loans are no longer being purchased, so those lenders are no longer lending.
- Banks have stopped offering giant loans, which means they are already concerned and responding.
- Virtually everyone who continues to lend has begun to demand that the borrower have more available funds, a higher credit score, and be a stronger applicant in every way. In addition, points and interest rates are increasing.
- Higher-priced properties will be the first to slow down, so focus on properties that are below the median price for your area (and know what that price is!).
- Wait for this “event” to last a while – possibly years. In 2008, the common response was that the worst was over and things would start to get better. “Things”, however, continued to get worse.
Remember, we are very early in the “new reality” and what lies ahead is difficult to predict. Stay in the know, be flexible, stay informed, stay in touch with other investors. You can always make money in real estate.
Do you agree / disagree with what I have shared?
What changes have you made or plan to make in the future?