Coronavirus: Influence on RE & why SFRs have increased demand!

[Zach Lemaster]

Thoughts on Coronavirus, and why right now is the ideal time to purchase single family rentals.

While the Coronavirus has had an impact globally in different ways, the SFR rental market is extremely strong with higher demand than ever! Also, interest rates have dropped to all time lows allowing an opportunistic window to lock in very attractive financing. It would be unsustainable to keep interest rates this low for a long period of time, so I'm sure we will see them increase before long. A lender colleague of mine told me that over the past two weeks there has been more initial loan & refinance applications than he has seen in the past 6 months alone due to the low rates. Many people are refinancing previous loans to free up equity, or making new purchases to lock in these historically low rates! Now creates a very opportunistic time to secure extremely attractive financing, or access equity through a refinance in a current home you own. SFR rental demand has increased dramatically as people was to stay away from communal living situations. This causes lower vacancies, higher rent values & the ability to increase rents more easily.

Warren Buffet said it best “Be fearful when others are greedy and greedy when others are fearful.”

To be a successful investor it is imperative to not make decisions based on emotion, but rather look at the numbers & trends to guide you to the most rational decision.  In an effort to assist our investors in making the most sound decisions currently I have listed some general impacts that the Coronavirus has had on real estate in my opinion.  I think you will find that our current circumstances has created a very opportunistic time to obtain a better return on your investment by purchasing single family rentals.
Overall effect of Coronavirus:

• Vacation & short term rentals have seen a decrease in demand as fewer people are traveling.
• Interest rates have hit all time record lows allowing for the best financing terms to lock in 30yr fixed rates that we have Never seen before!  This will allow ample cash flow.  Many investors with equity tied in properties are also refinancing to free up capital to re-leverage with more rental properties while they can.  It appears the Fed is continually lowering interest rates (even more yesterday).
• Stock market is extremely volatile right now causing uncertainty.  Investors are putting $ into more predictable assets like RE, Bonds, Gold, etc.  We can likely thank the stock market for the decrease in interest rates.  Remember, stocks and the RE market do not often correlate directly in terms of swings in the market as they are drastically different assets.
• Single Family rental demand is dramatically increasing as people do not want to live in community type settings having a higher chance of contracting the virus around groups of people. Renters want their space & privacy. This has driven SFR rental demand, increased rents, and reduced vacancy periods. SFRs are the strongest of all RE assets right now!

Main take away: Extremely attractive financing terms we have never seen before, higher than average rental demand for SFRs & transition of funds from stock market to safer assets like RE that will drive appreciation over time makes this a very opportunistic time to purchase stabilized SFRs. Cash flow numbers are higher, vacancy % is lower with higher rental demand and strong projected appreciation creates a perfect storm to aggressively expand your SFR portfolio!

Keep the end goal in mind, and take advantage of this opportunity to maximize your ROI!