Real Estate Investing In A Pandemic

I am sure there are tons of real estate investors wondering whether they can confidently invest in today's virus-ridden economy.

In the face of complete uncertainty, disregard any advice given as  high confidence or fact.  No one can see the future, anyone who puts their own money into any investment based purely on the advice of an "expert" will soon have less money to spend. 

People pay actual money to get tips on sporting events.  Also, to learn how to win the lottery (?) And they take the input of wholesalers at face value.  I advise against these practices. 

As a Bigger Pockets reader, you know better.

I am not telling you I know the future, just some alternatives ways to think about the current market, and your investment strategy.

Other than sitting it out, you can change your approach to reduce the high risk the market now carries.

A few thoughts:

If you are a rental property strategy, know that loans for this kind of asset are going to be very difficult to get.  Governors and mayors are declaring that no tenants may be evicted for 1-3 months.  That could be extended. No one knows if their tenants will have jobs to enable them to pay rent, and if not when the ability will return.  I would build a zero rent discount for 6-9 months into your offer.  At that, you are taking a major risk, not knowing when the property will start cash flowing.  I would only risk this if the deal you are getting is so compelling that you can stand to receive no rent for up to a year.   With rental property notes tough to get, you may need to pay cash and do a cash out refi later.  Note, HardMoney2Go does those.  

For flippers, the key obvious start is to offer your seller less than similar properties have been selling for recently, maybe 15-20%.  You are taking the risk, need to share that with the seller, as the have no idea what the value will be when sanity returns. 

If the seller digs in, offer them a share of the upside, everyone shares the risk and the reward. 

In all cases, make sure you get more time to close.  Its a good bet there will be limited to no lending available for at least a month.  Write your contract with a 30 day time limit, and also get an option to extend for a small increase in EMD.  

When financing comes back, expect rates and points to be be higher, leverage to be less, and that newbies may be shut out for a while.  LTV caps may fall by 10-15%, you could be looking at 12+% in interest and 3-5 points.  I have no actual knowledge where it will all level out of course.  

I suggest that if you get a good deal, start the underwriting process with a lender.  That way, when lending resumes you will be ready.  If you wait, you introduce 2-3 weeks of lead time to your loan underwriting.  At that point, thousands of borrowers have gotten a head start on you, and your closing could be delayed yet further.