A Call for Leaders in our Industry to Speak Loudly!

[Chris Clothier]

I’ve seen a few disturbing posts recently, mostly on social media, but a few here on BP as well, where the posters are reacting almost with glee that we may finally be heading toward a dip in real estate so they can cash in on good deals.

This post is strictly my personal opinion, but also a call for others in the real estate industry who came through the previous crash to provide some much-needed levity right now. Not only did my family’s company come through the crash, but so did I personally. Memphis Invest had been around since 2003 and was already a leader in the Turnkey real estate space. I don’t claim to know every company in the country, but I do know that there are very few today who were operating in that space at that time, so I think it is definitely on us to share reflection for other business operators and investors.

I also came through the last recession as an investor having bought my first property in 2002 and owning as many as 57 single-family homes at one time. I can tell you that most of what we are seeing and hearing today is simply fear-based reaction…and that goes for the knuckleheads talking about how much money they are going to make. If you do not have a heightened sense of fear right now, then you may be heading for mistakes. Fear is something that means we are alert to the fact that there is danger. We make moves based on faith, but our fear is what keeps us from getting cocky. I believe that a smart investor can make money in any city and in any market – including those that are buying properties right now. It simply takes a healthy understanding and respect for where we are.

This is not a time for popping off about how much money any of us are going to make in a market crash. This is certainly not a time for celebrating a possible drop in prices so we can pick up some low-priced properties. If you have been a cautious investor and have been planning for a time when you can invest in a bigger way, perhaps that time is coming. The best investors I know aren’t posting to social media or anywhere else about how much money they have or how much they are going to make. They go about their business as usual and never flash dollar bills, copies of checks, nor tell the world what their next move is. They simply do it.

There will be a lot of hurt in the next few weeks and possibly months. There is a distinct possibility that people will miss paychecks and others may lose their jobs. There is a relatively small possibility right now that prices go down and some properties become available at discounts compared to what you could pay last week. That would be market specific and often neighborhood specific. Even in 2009-2011, some cities saw tremendous growth and increases in value, while others saw retraction and falling values. We simply don’t know yet exactly how this will play out. Some combination of those things will mean that we as investors will have some choices to make. Here is how I hope my own choices are viewed when I look back.

If I want my residents to treat me with respect, then I need to treat them with respect. Now is a time for understanding and compassion. If we find ourselves in need of help from lenders and creditors, did we extend that same help to our residents? How about our vendors and the laborers who work on our properties? This is not the time to slow pay or no pay! Now is the time to stand up and act like an investor. We take risks – and hopefully they are always calculated risks – and that means we have to be prepared for a few bumps.

Now is not the time to cancel contracts out of fear, but it is a time to be prudent. If building out your portfolio was part of your plan and you have contingencies and monies set aside for investments, then by all means move forward. If you are speculating and hoping for a good outcome, now may be the time to pull back and learn a bit more. I have been on the phone today with a lot of investors, some I’ve known for a long time and some are newer to real estate, and my advice to all of them has been that we have been here before. As a company and as an investor, I can say with confidence that I believe that this turmoil will end. It may end quickly or may drag on for a while. I am very confident that the news cycle is going to be very scary. But I am equally confident that if we look for the good we can find it. I believe that at some point in 2020, we are going to look back and say “wow, that was a helluva roller coaster right there!”

I urge everyone reading this to be patient. Know your reasoning for buying real estate right now, whether you are looking to wholesale properties, invest in REITs or syndications, quick turn a property for a profit or buy single-family homes or multi-families for long-term buy & hold. If your long-term plans for real estate investing haven’t changed, then your short-term plans should not change either. Whatever your reasoning, I believe the fundamentals in many, many different cities around the country are sound. I definitely think the local economies are going to count on us to keep operating. Now is just a good time to be prudent and cautious and conduct our business in the most professional way possible.

I’ll end my post with this and an invitation to share.

I am a firm believer in faith and fear. I spoke of them earlier in the post. They are opposite reactions to the same belief. A belief in the unknown. I think it is healthy to have fear present because it keeps us from making silly moves and maybe keeps us humble. However, faith is how we move forward. It is what helps us make confident decisions and keeps us strong.

We’ve been here before as investors and we will all come through the current haziness a little clearer and better for it if we treat others the way we want to be treated. So, have faith! @Steve Rozenberg

[Jay Hinrichs]

Nice post Chris as we see the " I cant wait for a crash so I can cash in sentiment a lot on this site"  And probably from the majority that never lived through tough financial times.. Myself being in the business since 75 I have lived and worked through 4 of them and well not sure how much real estate will be affected by this latest one the VIRUS.  It feeds on itself the negative sentiment. 

Its also wishful thinking in my mind to believe that this Virus Pandemic hits us in the last month or so, and tomorrow there are going to be foreclosures all over the place and investors selling their properties for loss's.

As long as credit remains available investors will still buy and this situation will subside in 2 to 6 months. 

I think the lessons learned though for those in real estate especially the buy hold niche is when your providers or financial folks are running proforma's that show reserves for vacancy cap ex etc. that these are not numbers to just think about but numbers that need to move to cash and set in accounts for these exact scenarios. 

I see this as a wake up call to all investors to make sure they run their numbers and adhere to them. 

I also am somewhat stunned at some of the responses I have seen when I made a post a few weeks back ( as I was pretty sure landlords would have to work with their tenants short term during this crisis)  that those in the rental business were pretty cavalier with reponses like  ( No pay NO stay,  Not my issue, We are not a charity, ) so on and so forth.. 

As one who worked through the GFC we learned in these types of situations taking the hardline will cost you far more money than extending some further credit or waving some rent or payments. As you know the Banks learned this the hard way it took them a few years but once they realized what the realities were you saw all sorts of mitigation plans borrowers could use so they could keep their properties. 

I think current investors need to learn from those situations and get in front of it.. not take such hard stances that you create animosity with your customers / tenants etc.  Investors can be their own worst enemy when they take hard line stances.  I mean really lets say you forgive half rent for 2 months on a 1000.00 rental that's 1000.00 and maybe you ask the tenant to pay you back over the next year or maybe you just waive it all together, the benefits are your house stays occupied your tenants are grateful, as opposed to your tenants are not happy with you the city county says no evictions during these times and now you really have a mess on your hand when you could have cut it off in the beginning.. So then last point if you as a landlord cant afford 1k one time in the course of a year then your not properly capitalized and you might want to re think your safety nets.