Crisis is part of the investment game … and while the COVID-19 virus crisis is unlike any we’ve seen in modern memory, it’s not the first … or the last … crisis you’ll face as an investor.
The good news is that history shows us two things.
One … the human race will survive. And two … the backside of all busts is a big boom.
Until the crisis passes, we all need to find a way to survive … physically and financially.
Today, we’re talking about how lessons learned from the 2008 crisis can be applied to what we face today. We are focusing on how you can not only survive … but also thrive!
In this episode of The Real Estate Guys™ show, hear from:
- Your thriving host, Robert Helms
- His surviving co-host, Russell Gray
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Think and do
With so much going on in the world today, it is easy to get overwhelmed.
Today, we’re talking about how to manage life when you find yourself in uncharted waters AND what lessons learned from previous crises can do for us in our current situation.
We’re not here to tell you what is right and what is wrong. We’re here to talk about the facts and our own experiences.
We haven’t seen everything … but we’ve seen a ton. We don’t know all the answers … but we have gotten pretty good at asking the right questions.
One of our favorite sayings is, “Think and do is better than wait and see.”
When there’s a crisis, the tendency is often to hunker down and wait to see what happens. But waiting and seeing has economic consequences.
The big question now is … what should we be thinking about?
Understanding what is happening in the market
Calmer heads always prevail.
As real estate investors, we have a huge advantage. Markets like the stock market … or even the metals market … move instantly. That’s not true with the real estate market.
If you look at what has happened in the stock market, with equity prices, and in bonds compared to what has happened in real estate … you’ll see a drastic difference.
People who invest in stocks are seeing a market drop that appears already worse than the Great Depression. But your mortgage or your rent haven’t changed.
That means that the person on the other end … the landlord or mortgage holder … their income hasn’t changed either.
Now, that doesn’t mean it won’t. But the difference between now and 2008 is that in 2008, lenders were not ready to negotiate. They couldn’t see the ripple effect that would go through the financial system.
But today, the Fed clearly sees it. Their reaction tells you they are bringing out the big guns early … and lenders are already beginning to contact people about ways to work things out.
Even with all this intervention, there is still a chance that real estate investors will run into a cash flow problem … but the advantage is that real estate moves slower. You have more time to react now to future possibilities.
Remember, the stock market doesn’t really reflect what’s going on in the economy. Stock prices are reacting to an anticipated slow down of corporate profits.
There is plenty of cash out there. That’s not the problem. The problem is that it isn’t flowing.
We’re basically watching an economic heart attack take place. It doesn’t matter what the blood volume is. The concern is that the blood isn’t flowing.
So, you have to look at what is happening right now and make adjustments. Now isn’t the time to be a deer in the headlights investor. Now is the time to think and do.
Making smart choices for your portfolio
We think that everybody listening in is going to want to own more real estate 10 years from now than they own today.
Some of you may see opportunities … but you don’t have enough resources to take advantage.
You can see bargains … quality assets going on sale. What do you do?
That’s why we are big proponents of syndication.
We’re hearing on the street already that lenders are beginning to back off on their lending. If that is the case, it’s going to be a resurrection of private equity.
When money goes looking for a safe haven after a nauseating ride on the Wall Street roller coaster … it often ends up in real estate.
These investors are either on the equity side buying into real estate deals or on the debt side buying private mortgages and getting the yields.
You have to be smart … but there is going to be a lot of money coming into real estate because of what’s happening.
If you’re well-positioned and you underwrote your property correctly and you have a good lending partner, you’ll probably be ok.
If you didn’t … well, there are going to be people who have to give up some real estate.
If you’re in a good position, syndication can be a great way to get you ready to buy when those who need to sell make their move.
And don’t forget that this doesn’t apply to just real estate. Real assets like metals and oil will have good deals, too.
One of the biggest lessons we gleaned from 2008 is to keep your finger on the pulse of your markets and niches.
Wherever you are in the world, whatever niche you’re in, whatever market you’re in … lean on your tribe. Enhance your participation in whatever forums or online meetups you have the opportunity to be part of.
The closer you get to the front lines … the more real-time your information is … and the better you will be able to make decisions.
For more lessons learned on investing during a crisis … listen in to the full episode!
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