Coronavirus Affects On Property Investing?
On defense, my primary concern (as an investor, not as a human being) is that in general business depends on tenants and buyers who earn money at jobs. So, if people have a tough time going to work or getting paid, that would certainly affect my ability to collect rent. One major advantage we have is that the majority of all of our hundreds of tenants is that they are social tenants. The Home office and the councils actually pay their rents.
We have preplanned our property model in this fashion in order to be defensive.
Most people don’t have huge cash savings. So, if income stops coming in, they lose ability to pay rent in a matter of weeks or at most months.
And while those cash shocks could be short lived, it’s also possible that this leads to a broader recession (again, I’m no good at predicting it – just saying it’s possible).
So, how do you prepare to play defense in these scenarios, even if you think it’s unlikely?
- Cash in the bank. Do what you can to bolster your own cash reserves. And review your cash back-up plans, like lines of credit.
- Be proactive. Problems are always easier to solve if you face them head on. Should your tenants find themselves in a cash pinch, talk to them. If they have a reasonable chance of paying you over time, don’t evict a good tenant in order to have a vacancy that could cost much more.
- Learn & be flexible. Don’t stick your head in the sand. Be aware, keep learning (my course next week is a good opportunity!), and adapt to changes as you see them.
While defense comes to mind first, you should also think about playing offense to prepare for opportunities.
Anytime that the local or national economy experiences unexpected and extended jolts (this could turn into that), some people will not have enough cash personally or in their business. And that shortage of cash could lead to buying opportunities for you as an investor.
How do you prepare for these opportunities?
- Line up cash and purchase financing. Revisit your banking, private lender, and other credit relationships. Make sure those are ready to move quickly on a purchase opportunity.
- Keep looking for deals. Deal finding is like fishing. You never know when a great opportunity will “bite.” So, keep putting those fishing lines (i.e. lead generation activities) in the water.
- Make conservative offers. Don’t be shy about your offer if it’s lower than asking price. Make offers that are profitable over the long run for you. And keep following up if you get an initial no.
My JV partner and I are planning to be patient, watch the latest developments, and be ready for property opportunities as they arise. If this all blows over quickly, we’ll be no worse for it. But if property opportunities fall in our lap, we hope to be ready for them.
I’m sure there are other current and potential impact I haven’t mentioned. I’ll be watching, learning, and adapting just like all of you – both personally and as an investor. And I’ll share what I learn here in my newsletter, podcast, blog, and social channels.
I want to leave you with an attitude as an investor that comes straight from someone who has thrived as an investor through many ups and downs:
“Be fearful when others are greedy and greedy when others are fearful.
– Warren Buffett “
It’s in the times when others are panicking and fearful that the best deals are made. So, prepare and be ready.
I hope all of you stay safe and healthy wherever you’re reading this from.