What have you learned from COVID-19?

[Matt Jones]

Anytime we face a challenge personally or as a society there are lessons to be learned from that challenge. COVID-19 has challenged different people in different ways and we will probably each have our own takeaways from this dynamic time in our lives. Even those who didn’t lose jobs, get sick or know anyone who was sick still have plenty to learn. Some of my lessons learned so far during COVID-19 are:

1. Cash is king. I personally invest in real estate and spend a lot of time with other investors but this lesson would be even more valid for small businesses and even just for individuals. Having an emergency fund is absolutely critical no matter how well things seem to be going. If you are a small business owner or real estate investor you should be working toward 3-6 months in reserve operating expenses for both your endeavors and your household. With short term rentals being prohibited in the state of Florida and overall rent collection down it highlights how important it is to have enough cash to keep your life/investments/business running even if you cannot make any income in the short term.
2. Once you have a farm don’t bet the whole thing! To get into real estate investing and later real estate sales I made some big bets on myself and put everything I worked for during my 20’s at risk. The economy was good, I worked my tail off and both bets paid dividends. In the end I am thankful for both choices and where I am today. That said, had I made those choices in 2020 instead of 2015-16 things could have turned out differently. I have been working hard over the last 5 years to build a rental portfolio and sometimes I am frustrated by having to pass on deals because the timing isn’t right or I don’t have the capital. I have seen other investors grow by doing deals that I certainly could have done but they just didn’t fit my criteria or I didn’t have the capital because I was involved in another deal. That’s painful sometimes. Despite temptation, I have not pulled money out of my performing rentals to help me do more deals. I started with the intention of having a certain amount of equity in my portfolio. While I could grow faster if I borrowed on that equity to reinvest, I view that equity as my margin of safety. If the market went down or my tenants don’t pay rent I can handle both much better and with far less risk because I have maintained my margin of safety. With COVID-19 a large reduction in rent collected looked like a real possibility but I maintained peace of mind knowing that my mortgage payments were far less than rents so as long as half of my tenants paid I could continue to pay the bills without drawing from reserves or personal capital. Over leveraging myself to do another deal or a bigger deal may have looked low risk a few months ago but now I am very thankful that I stayed true to my strategy and did not make bets that placed all of my holdings at risk.
3. Be careful how much media, social or otherwise, that you consume. In the beginning days of the COVID-19 pandemic I was reading a lot of news and on various social media too much. I was feeling genuine anxiety. After intentionally backing off of the news and filling my head with quality material like goods books, podcasts and conversations, I felt much better. I like the visual Darren Hardy laid out in “The Compound Effect” of a glass of dirty water(your mind with no control over what goes into it, receiving lots of negative news and social media) becoming a glass of clean water if you run a steady flow of clean water(good books, podcasts, classes) into it. We can stay informed and responsible on a fraction of the media we consume. Don’t get pulled into the 24 hour negative news cycle - it’s not helping.
4. I hate fixed costs & you should too! I am a bit of a control freak. I don’t admit it often but it’s true. For that reason I have avoided large fixed costs both personally and in my business life. Things like massive car payments, huge house payments, credit card bills, expensive office leases, overhead, payroll, ect… I am thankful for having low overhead in normal times because it gives me more options in my personal and professional life. In addition, I don’t normally need to make bad short term decisions motivated by the need for money to pay next month's bills. The need for control overwhelms my need for the newest or best this or that and I tend to be conservative financially(even while trying to be aggressive in my investments). I love a good splurge just like anyone else but I have never in my life felt more thankful that my splurges tend to be one time things because I rarely view anything(that doesn’t make me money) as being worth the payments due over the long term. Low personal & business overhead = maximum flexibility and security.
5. Long term plans don’t need to be scrapped or maybe even changed. That’s why they are long term plans! I was amazed at the amount of people who were selling off stocks because they were in a coronavirus panic. If you don’t need the money today the only thing you are doing by selling when the market tanks is locking in your losses. I watched things closely and reviewed my long term plans but nothing happening today changes my 5, 10 and certainly not my 20 year outlook. If you have been diligent in charting the course don’t abandon the course unless your personal ship has been wrecked. Some people have experienced major loss and disruption due to COVID-19 but many more have not been impacted in a major way financially. Don’t get so excited by something in the short term, that hasn’t wrecked your ship, that you lose sight of where you are headed. Stay the course.
   
   Specifically in and for Real Estate:
6. Over communicate in times of uncertainty. Whether you are a landlord or a real estate agent, in a crisis it is more important than ever that you keep people informed. It is much easier for people to freak out, make bad decisions or assume the worst when they are left to guess in times like this. Keep the people around you informed about the plan(you do have a plan don’t you?) and communicate more than you usually would to keep things running smoothly.
   
   
   Those are my personal takeaways from the first 6 weeks of COVID-19's impact on the US. Now I want to know...
   What are your lessons learned during the last 6 weeks?

[David Barnett]

This is a great thread, and great post @Matt Jones!  I agree with Shiloh on multiple sources of income.  Diversification is key, especially when it comes to income (active, portfolio and passive).  

The things that I have learned thus far is that my W2 job can be done 100% virtually.  It has been an interesting mental shift and has opened up my mind to new possibilities.  The second thing that has been reinforced during this period is that it is good to have extra cash laying around to be able to procure needs (for example, I'm from a state that is heavier on the restrictions).  The extra cash has made it possible for me to go online and source needs (groceries, pantry staples, etc.) without having to worry about the cost.  Sure, I don't like spending extra, and I'm in a position where it doesn't hurt my overall finances.  Having means to be able to weather this storm has further cemented the need for me to become financially free.  Last and not least, I had a little extra money that I could throw into the stock market on a hunch.  I believe that Delta's stock is the best run of the big legacy domestic carriers. I don't believe the US Government will allow them to fail, and their stock price is extremely depressed due to all of the COVID-19 related travel cancellations.  I believe they are a longer term play and will rebound in the years to come.

[Samuel Nulman]

I work in temporary relocation, I've heard from LL's across the country that markets are actually picking up as people are trying to get ahead of the reopening economy. Weird news to hear during  pandemic but go figure. Good times are coming!

[Matt Jones]

@Samuel Nulman  They aren't wrong in my market.  I put a house on the market Thursday at lunch that I wasn't sure would be popular and had 7 offers within 36 hours.  This is a 2 bed 2 bath home in an area of primarily 3/2's, has some very very 80's stuff going on and not the usual home that gets lots of offers but Covid-19 put a larger clamp on new listing than on ready buyers so it has actually made our market hotter than it was before.

[Matthew Paul]

What have I learned from Covid19 ?  Well a lot of people I thought were wealthy are not .

A lot of advice I have gotten about borrow as much as you can was BS. 

That the economy was a lot more fragile than I ever thought . 

And that living below your means and socking away cash is a good thing .

I have felt no financial effects from this event at all . My contracting work is booming , my properties are paid for and all my tenants have jobs in essential services and are all paying . 

When the smoke clears I will start buying , the deals will be out there for those with cash 

[Dante Moore]

I've learned that there isn't any protection for landlords/owners if renters don't pay as well as the government apparently sees renters as in need of help but landlords/owners are on their own.  

[Daniel Haberkost]

Originally posted by @Matt Jones:

Anytime we face a challenge personally or as a society there are lessons to be learned from that challenge. COVID-19 has challenged different people in different ways and we will probably each have our own takeaways from this dynamic time in our lives. Even those who didn’t lose jobs, get sick or know anyone who was sick still have plenty to learn. Some of my lessons learned so far during COVID-19 are:

1. Cash is king. I personally invest in real estate and spend a lot of time with other investors but this lesson would be even more valid for small businesses and even just for individuals. Having an emergency fund is absolutely critical no matter how well things seem to be going. If you are a small business owner or real estate investor you should be working toward 3-6 months in reserve operating expenses for both your endeavors and your household. With short term rentals being prohibited in the state of Florida and overall rent collection down it highlights how important it is to have enough cash to keep your life/investments/business running even if you cannot make any income in the short term.
2. Once you have a farm don’t bet the whole thing! To get into real estate investing and later real estate sales I made some big bets on myself and put everything I worked for during my 20’s at risk. The economy was good, I worked my tail off and both bets paid dividends. In the end I am thankful for both choices and where I am today. That said, had I made those choices in 2020 instead of 2015-16 things could have turned out differently. I have been working hard over the last 5 years to build a rental portfolio and sometimes I am frustrated by having to pass on deals because the timing isn’t right or I don’t have the capital. I have seen other investors grow by doing deals that I certainly could have done but they just didn’t fit my criteria or I didn’t have the capital because I was involved in another deal. That’s painful sometimes. Despite temptation, I have not pulled money out of my performing rentals to help me do more deals. I started with the intention of having a certain amount of equity in my portfolio. While I could grow faster if I borrowed on that equity to reinvest, I view that equity as my margin of safety. If the market went down or my tenants don’t pay rent I can handle both much better and with far less risk because I have maintained my margin of safety. With COVID-19 a large reduction in rent collected looked like a real possibility but I maintained peace of mind knowing that my mortgage payments were far less than rents so as long as half of my tenants paid I could continue to pay the bills without drawing from reserves or personal capital. Over leveraging myself to do another deal or a bigger deal may have looked low risk a few months ago but now I am very thankful that I stayed true to my strategy and did not make bets that placed all of my holdings at risk.
3. Be careful how much media, social or otherwise, that you consume. In the beginning days of the COVID-19 pandemic I was reading a lot of news and on various social media too much. I was feeling genuine anxiety. After intentionally backing off of the news and filling my head with quality material like goods books, podcasts and conversations, I felt much better. I like the visual Darren Hardy laid out in “The Compound Effect” of a glass of dirty water(your mind with no control over what goes into it, receiving lots of negative news and social media) becoming a glass of clean water if you run a steady flow of clean water(good books, podcasts, classes) into it. We can stay informed and responsible on a fraction of the media we consume. Don’t get pulled into the 24 hour negative news cycle - it’s not helping.
4. I hate fixed costs & you should too! I am a bit of a control freak. I don’t admit it often but it’s true. For that reason I have avoided large fixed costs both personally and in my business life. Things like massive car payments, huge house payments, credit card bills, expensive office leases, overhead, payroll, ect… I am thankful for having low overhead in normal times because it gives me more options in my personal and professional life. In addition, I don’t normally need to make bad short term decisions motivated by the need for money to pay next month's bills. The need for control overwhelms my need for the newest or best this or that and I tend to be conservative financially(even while trying to be aggressive in my investments). I love a good splurge just like anyone else but I have never in my life felt more thankful that my splurges tend to be one time things because I rarely view anything(that doesn’t make me money) as being worth the payments due over the long term. Low personal & business overhead = maximum flexibility and security.
5. Long term plans don’t need to be scrapped or maybe even changed. That’s why they are long term plans! I was amazed at the amount of people who were selling off stocks because they were in a coronavirus panic. If you don’t need the money today the only thing you are doing by selling when the market tanks is locking in your losses. I watched things closely and reviewed my long term plans but nothing happening today changes my 5, 10 and certainly not my 20 year outlook. If you have been diligent in charting the course don’t abandon the course unless your personal ship has been wrecked. Some people have experienced major loss and disruption due to COVID-19 but many more have not been impacted in a major way financially. Don’t get so excited by something in the short term, that hasn’t wrecked your ship, that you lose sight of where you are headed. Stay the course.
   
   Specifically in and for Real Estate:
6. Over communicate in times of uncertainty. Whether you are a landlord or a real estate agent, in a crisis it is more important than ever that you keep people informed. It is much easier for people to freak out, make bad decisions or assume the worst when they are left to guess in times like this. Keep the people around you informed about the plan(you do have a plan don’t you?) and communicate more than you usually would to keep things running smoothly.
   
   
   Those are my personal takeaways from the first 6 weeks of COVID-19's impact on the US. Now I want to know...
   What are your lessons learned during the last 6 weeks?

You make quite a few great points here Matt. Personally, this has taught & or reinforced the following for me (unsurprisingly, some are very similar to yours). 

1.) Reserves are essential! Early this year I kept looking at cash I had set aside thinking it was excessive and that I should have more of it invested. When COVID hit several of my income streams dried up and having that cash has made the whole experience easier. I haven't had to tap into it yet, but it's helped me to sleep at night! And now that I've adapted to our current situation I can deploy (some) of it when the right deal comes along. 

2.) Don't let your expenses creep up with your income. Much like my first example, I had begun to allow some of my expenses to needlessly increase. When the lock down hit I corrected that immediately and will keep it that way. 

3.) Nobody knows the future/Each recession is different. You touched on the toxicity of constant consumption of social media/news and this goes hand in had with that. If you pay too much attention to these news (I use that term generously) sources you'll frequently hear people trying to predict when/how the market will crash/what the recession will be like and it's easy to start to buy into it. Outside of the medical world, nobody had a clue this was coming and I doubt anyone thought a scenario could occur that caused retail/restaurants to be shutdown nationwide. Sure, we can generalize that the market will cycle up and down but to try and get specific is just ridiculous. 

 4.) The overarching principles do not change. Before corona I capitalized my business conservatively and was looking for undervalued real estate, in growing parts of town that cash flows from day 1. Since corona hit I'm capitalizing my business conservatively and looking for undervalued real estate, in growing parts of town, that will cash flow from day 1. About a month ago there was a trending BP article titled "Dave Ramsey looks like a genius right now" which I found to be especially irritating. If you thought Dave Ramsey was a genius 6 months ago then you likely should still think that way and vice versa. The principles of investing don't change because of a recession. 

These are the main items that COVID has brought to the forefront of my mind! Times like these really just take us back to the basics. 

[Matt Jones]

@Daniel Haberkost Great post & point.  I think #2 is a good one that no one has mentioned.  Cost creep in your personal life and business is almost inevitable when times are good.  I had "Shift" by Gary Keller on my reading list for the beginning of the year(I had no idea Covid-19 was coming but the market was over due for a shift and I wanted to read the book before I was in the middle of it) and cutting costs that don't drive revenue was a point that Gary drives home hard in the book.  

@Account Closed yes, being purposeful and useful with your communication is vital.  If it would have been bad and counter productive to send out before it would be doubly so now.  But had that same property manager sent out proactive communication to tenants and owners instead of acting like the sky was falling he or she could of avoided the mess they created by sending out negative and tone deaf messages.

[Michael K Gallagher]

@Matt Jones fantastic questions, I'd have to say the biggest lesson I learned is that at the end of the day we are our own biggest limitation.  This experience has taught me that at the end of the day all I need to do is be disciplined and go after what I want, and that my effort, or lack there of, and discipline is all that stands in my way.  Stupid and cliche I know, but this entire situation has brought that out of me.  It's been somewhat of the "weed out" class for productivity for me.