My, how things have changed – quickly! If you are still investing, I would like to know 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 of it is based on our 2008-2010 real estate investment experience.
- Do not stop. Historically, real estate still works, you just have to adapt to market changes. SO:
- stay flexible
- find out about and get financing
- stay involved in online networking groups – local and national – to keep up to date with changes you need to be aware of as they happen.
- We have increased our marketing. For what?
- People are going to need money, which means selling their personal properties or those of their family members. We want to be available when needed to offer any help we can.
- There are already fewer investors buying due to fear of the future and lack of funding, so there hasn’t been a better time to be in the market in years!
- Educate 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 the business gets tougher now, those who are prepared, informed and educated have an incredible opportunity.
- Buy cheaper. We all know the future is uncertain. The price values could drop sharply in the coming months/years. Sellers know this too, which is why many will want to sell as soon as possible. They also realize that you are taking their risk when you buy, so they understand when you offer less than they expect. And, it’s true, you take risks. When you make an offer, make sure it’s an acceptable price if the value drops over the next 3-6 months.
- Properties are still selling wellso buy properties that you can convert quickly – now is not the time to buy big rehabilitations!
- Buy and sell virtually. Now is the perfect time to learn how to take your business virtual. We are currently doing our due diligence online, asking permission to walk around the property and take pictures, then asking the seller to send us pictures of the interior themselves or leave the property while we let’s go in and take pictures. Sellers appreciate our concern for their welfare. We require that they allow a viewing of the property prior to closing to ensure their own photos don’t omit something we should know.
- Prepare for longer days in the market during the sale. Keep an eye on your local property’s marketing days to get an idea of what to expect. As lenders begin to dry up and/or increase their borrowing requirements, there will be fewer qualified buyers and sales and closings will take longer.
- Expect lenders to tighten borrowing terms.
- We have already seen private lenders stop lending due to fear of future risk and the need to keep their funds safe for themselves.
- Many hard money lenders stopped lending all together because they were bundling loans and selling them. These loans are no longer purchased, so these lenders are no longer lending.
- Banks have stopped offering jumbo loans, which means they are already worried and reacting.
- Virtually everyone who still lends began to demand that the borrower have more funds, a higher credit score, and be a stronger candidate in every way. In addition, they increase points and interest rates.
- The most expensive properties will be the first to slow downso focus on properties that are below the median price in your area (and know what that price is!).
- Expect this “event” to last for a while – maybe years. In 2008, the common response was that the worst was over and things were going to start to get better. “Things”, however, continued to get worse.
Remember, we are very early in the “new reality” and what is to come is difficult to predict. Stay informed, stay flexible, stay informed, stay in touch with other investors. There is always money to be made in real estate.
Do you agree/disagree with what I shared?
What changes have you made or plan to make in the future?