The COVID-19 pandemic and panic is well on its way to eclipsing the Great Financial Crisis of 2008 and the Great Depression of 1929 as the most devastating economic event in modern human history.
But humanity has a way of surviving even the greatest calamities … odds are we’ll survive this one too.
So, we’re taking a look at the current crisis through the lens of things we’ve learned from the past.
We’re discussing where future opportunities might be and ideas for what investors like YOU can do when facing uncertainty.
In this episode of The Real Estate Guys™ show, hear from:
- Your keeping calm host, Robert Helms
- His carrying on co-host, Russell Gray
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Economic issues and COVID-19
There’s so much going on in the world. COVID-19. The Fed lowering interest rates to zero. Social distancing. Sheltering in place.
Today, we’re going to be discussing one of the biggest questions our listeners have been pelting us with … what does coronavirus mean for real estate investors?
Let’s start with this truth … it doesn’t matter what we think. All that matters at the end of the day is what you think. We’ll just share some food for thought.
Remember, we don’t give advice. We give ideas and information.
What we have is our own perspective … and that doesn’t mean we are right. Right now, some of our very good friends have polar opposite opinions and positions on this topic.
But that’s why we can talk about it! We can all respectfully disagree and share ideas so you can make your own decisions.
We’re going to focus mostly on the economic issues surrounding COVID-19.
From an economic perspective, this situation is what we call a Black Swan … something nobody saw coming.
The first thing we have to do is accept that we can’t do anything about the coronavirus. It is out of our control. But we can control how we respond.
There can still be opportunity
The fact of the matter is that when certain parts of society go away … even temporarily … it has a lasting impact. Those things don’t come back quickly.
It slows the velocity of the economy. Even the Fed can’t speed that up. All they can do is try to increase the volume and hope the volume compensates for the velocity.
We saw a bunch of money run from the stock market … which tanked … and that has an impact on people, especially retirees.
That money moved into bonds, which drove interest rates way down … which actually created a huge opportunity for real estate investors to lock in mortgages at record lows once the crisis abates.
But the flip side is that the Fed is printing a lot of money. The government is going into debt … and that changes the already frail economic system.
The flip side of chaos, of course, is opportunity. There’s always opportunity to help the situation, because making money is a byproduct of providing solutions in the marketplace.
SWOT analysis, potential outcomes, and diversity
With a situation like this, there are short-term, mid-term, and long-term effects.
Short-term there is a demand shift for certain types of real estate. Most month-to-month tenants aren’t moving over the virus.
In fact … big picture … those tenants are probably staying put, provided they have income. If they were thinking about making a move, they are probably staying put.
Now is a good time to do a SWOT analysis … strengths, weaknesses, opportunities, and threats … of your portfolio.
Look at each individual property and ask yourself, “Where does the money come from? Where do the tenants work? What drives the local economy?”
Looking at the answers to these questions, you can make an educated prediction for what is going to happen in that sector in the future.
You may even be able to make some moves now to reduce your risk or exposure … like refinancing debt, lowering costs, or tightening up expenses.
Now, the challenge is that everybody is instinctively cutting back. That’s part of how we go into recession.
If we cut way, way back and everybody withdraws … we’re going into depression.
Then the question is, does the Fed and the government have enough firepower left to prevent that from happening … or are we about to go through a gigantic economic reset?
For those who have all their investment in stocks … it’s a scary time. The nice thing about real estate is that it’s stable. Stock investors might think it is boring, but it’s stable.
More of those investors are going to be looking to go into real estate … which means a huge opportunity for syndicators.
If you’re thinking of making the move to real estate, you need to undertake that same SWOT analysis for the various real estate niches.
And we can’t preach diversity enough. Diversity of income. Diversity of markets. Diversity of real estate niche. Diversity helps you weather the storm.
Real estate for the long haul
At the end of the day, YOU are the only person who can decide what is best for you and your family. Do the work to get educated, analyze your deals, and do what you feel is right.
The reality is that 10 years from now, this crisis is probably going to be in the history books. It’s going to be like 2008 … something that happened and changed the world quite a bit.
But the long-term fact is that people will always be out there. They will need places to live. They will need places to gather. They’ll still need medical care and to eat.
Real estate will always fulfill a potential need. In the long term, smart investments remain smart investments.
Real estate is about buying and committing and being in for the long haul.
For more on what the coronavirus means for real estate investors … listen to the full episode!
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