6 real estate investing takeaways from the coronavirus market

What a time to be involved in real estate, am I right? Not just real estate investing either. It seemed like the whole industry went into chaos when the rates dropped to momentous lows and shutdowns became global. I found this powerful urge to buy my second investment property and secure that low interest rate, leading me to contact an “investment-minded agent” in my area. I analyzed over 100 deals in a month, nailed down my Crystal Clear Criteria (C.C.C.), met countless investors who created success doing deals in the zip codes I was interested in, and watched every one of Brandon Turner’s Wednesday Webinars for weeks (I am still watching them regularly!). Every day is still a deal-hunting grind, squeezing in every second of data crunching time I can manage.

But even the most experienced investors and agents I met could only throw their hands up when I questioned them on investing conditions in today’s market. Even they were stumped. Is now the time to buy? Or do we wait for this Real Estate market crash that everyone keeps predicting? Unfortunately, I do not have the answer to that, and I would bet that anyone who proudly does have the answer is speaking from false pretense. That’s not the point of this article though.

As of now (mid to late-July 2020), I am in the process of finding my next deal with the hopes of building a portfolio that will lead me to the financial freedom I need to realize my dream of becoming a full-time writer in the middle of a global pandemic. No pressure, right? 

In the last 3 months here in California, I have made six offers that would've been attractive pre-coronavirus but have lost out on all of them. Why? Because this market right now, in any state, is unlike anything anyone's seen in the last decade.

Here are 6 real estate investing takeaways from the coronavirus market:

1. On the MLS, you won't pay the asking price

I believe that the only way to truly make it fair for buyers right now searching the MLS would be to require the listing agent to include an asterisk next to the asking price with two laughing emojis. Seriously, if the property you are interested in is attractive in any way at all (style, neighborhood, investment potential, etc.), there is no way you'll even pay close to the asking price. 

If you're like me and in the process of doing your first, second, or third deal, then most likely it's coming from the MLS. Which is a great idea for us, but on the first offer I made during the shutdowns (offering the asking price), there were 15 other offers and it closed $30,000 over the asking price. The house was on the market for a total of five days.

I was optimistic though, telling myself, "Andy, it's okay, that was a really nice looking property in a good area. Totally understandable." But as I made my next two offers on properties described by the listing agent as "investment opportunities" (distressed properties still livable enough to put on the market) in not-so-nice areas, I found myself in the same situation as before.

Us Real Estate investors know that every dollar counts and we can't afford to pay $30-$40,000 extra on top of commission fees, repair costs, and more just to secure that deal. I recommend doing some research on how to make low offers more attractive. A smart agent can help you understand some of the strategies (find agents in your market under the "Network" tab above). Also, I personally have read some great posts recently on the Bigger Pockets Blog and forums on this exact topic. Maybe the seller is in a tough position and, with the right deal, they may take less money if it means a quicker close.  

2.  Do not offer with your emotions

I still remember how excited I was when I toured my current home. The second I walked through the door, I clearly envisioned all my stuff in the rooms. I wanted to live there so bad. It fit my C.C.C.s perfectly and I saw a tremendous amount of potential growth. And I got it for less than the asking price, woohoo! But this was also before the coronavirus, and I was up against just one other weak offer. Thankfully, I didn't find my house today. Otherwise, I would've made a huge mistake!

I know how hard it is to lose out on a property that feels so right. Maybe the numbers worked out great, you had all of your "players" (contractors, lenders, inspectors, etc.) in position , you knew that this property would make you money, and the yard was just so adorable. But remember, it's only a good deal for so long. You get into a competitive bidding war with another buyer without continuing to update your numbers, and the next thing you know, you're losing money every month. Suddenly, that "dream" property turns nightmare and your hatred for it builds.

I still have those "butterflies" when I submit my offers. It's hard not to get emotionally invested in properties. And can you blame me? The Real Estate investing game is so much fun and exciting, and you can make money! But, like any game, the fun comes with winning. There is no winning in emotional investing. 

3. Understanding the "as is" clause  

The one consistent thing about every offer I've made in this market is that the sellers have always demanded that we accept the property "as is". For those who don't know, this term means that no matter what comes up in an inspection, the seller will not address it. 

On my first deal in February 2020, the seller was really motivated to get rid of the house. They had moved a few months prior paying double mortgages along the way. Without the high buying demand/low inventory then that we're seeing now, we were able to get the sellers to pay for termite tenting and a few other repairs that totaled nearly $8,000! This is not the case now. 

According to data listed on Redfin.com, the number of homes for sale are down 25.8% compared to last year. That is an incredible drop, and even more incredible when you consider single-family home purchases shot up 16.6% during the month of May, according to the Commerce Department. 

Everyone can now buy their dream home at a historically low rate too. According to Freddie Mac data, mortgage rates hit a 50 year low at 2.98% recently compared to the 3.82% in July 2019. This juxtaposition created a seller's market, and believe me, the sellers know it too. 

So you can look at the "as-is" clause in a number of ways though. David Greene, co-host of the Bigger Pockets podcast and Bay Area agent, spoke about this exact term in a recent episode. The way he explained it was that there is no actual weight to this clause unless an affidavit is signed by the buyer agreeing to accept the property in its current condition. 

So you can go into contract on a property "as-is" with the ability to submit a repairs request, or back out completely, should you find anything concerning during the inspection contingency, as long as an affidavit was not signed by you when your offer was accepted. 

By getting into contract this way, your competition is suddenly eliminated. And if you wait until the latter half of the contingency period to submit that repairs request, its now been almost a week since the competition even thought about that property. They're long gone! And a seller doesn't want the deal to fall through, starting the whole process all over again. 

Another "as-is" strategy works a little differently and tends to benefit many BRRRR and Fix & Flip investors. If you know that you are going to rehab the property significantly already, you might as well include the "as-is" clause in your offer (even tell them that you will sign an affidavit proving your seriousness) and shorten the contingency period. Now you're a very attractive buyer! Make this clause work for you. Only do this though after careful consideration and with some wiggle room in your budget as it can be risky.   

4. You hesitate, you lose

I learned this lesson the hard way a few times, and this piece of advice can be said for any market. But during the coronavirus market, homes in California are going under contract in less than a week. Can you believe that? 

I work full time right now, and the fact that I can't leave work to view properties the day they are put on the market hurts me. That one day makes all the difference. So if you have been down on your luck recently after losing your job during the shutdowns, look on the bright side! Your newfound free time is an advantage in this lightening fast market. And if you are ready to invest, learn to pull the trigger without hesitation.

So how do you avoid getting burned when you only have a day or two (in some cases a few hours) at most to make a decision? There are a few things to do, which I will get into, but at the end of the day, there will be some degree of luck that plays a factor unfortunately. As someone who likes their control (maybe you can relate), this gives me so much anxiety. In order to combat these worries, I know that a few things must be done.

The first is mastering your area(s) of interest. I've narrowed down my search to only a few zip codes for now, and I have become the master of those areas. I know every property that goes on the market and the difference between a good deal and a bad one. I also know how much I could charge for rent, depending on the street, number of bedrooms and bathrooms, and condition of the property. Being a pro member, unlimited uses of the "rental property" and "BRRRR" calculators have been my best friend. I recommend any of the Bigger Pockets calculators to anyone serious about Real Estate investing. 

The second way to stay ahead in this market is by making sure that you "have your ducks in a row". I first heard this term during one of Brandon Turner's Wednesday Webinars and never considered how much of a difference this makes until now. It essentially means being completely prepared and ready to act efficiently should a good deal come on the market. 

My agent and I work with my lender on an almost daily basis getting pre-approval letters and understanding the rates I could get (there is a difference in rates based on the price of the property and whether or not it's owner occupied). I also do continuous data analysis on every property I go see, and I talk to my real estate "team" (handyman, contractors, inspectors, escrow companies, etc.) regularly to make sure they are ready to go should I make an offer that day.

So, while I may not have all the time in the world to act as quickly on a property as I'd like, at least I know that when my time comes, I am beyond ready to act. Don't miss out on money making opportunities because you aren't completely ready.

5. Know how long repairs will take

I am currently in the process of converting my garage into another bedroom. During the planning stage, I laid out all of my fears and addressed them one by one. They ranged from costs and value to room usage to wondering if I could even add a room in the first place. I never once considered how long it would take to complete what I thought was a simple project. 

When ordering the door and window I needed though, delivery times, no matter where I looked, were at least a month out. After calling the contractor to schedule out some time, he wasn't available until two weeks after the door and window were scheduled to arrive. Then, the project is going to take a week or two. That's two months before I'll be able to do anything else in there.

Home construction increased 17.3% in the month of June, according to the Commerce Department. This number is actually down almost 5% compared to last years numbers, but with virus cases currently spiking all over the country, less people are going to be available to work on your property. 

And in California, the housing crisis forced city officials to loosen restrictions around Accessory Dwelling Units (ADUs). You are now able to add a separate (max. 1,200 square foot) ADU to your property for renting, personal use, or really whatever you want! To say everyone is all over that would be an understatement. 

Take all of this into consideration if you plan on buying a property that is going to require some rehab. Are you ready to pay off the mortgage payments while repairs are being done? Thankfully, mortgages take a month or two to process after the initial purchase. You might be able to get everything done in that time frame, but this, again, requires you to "have your ducks in a row". 

6. Make it known to the world you're looking to invest 

This where all of those networking events are going to start paying off. Despite the market conditions, there are still people out there finding deals (both on and off market) and making good money. Picking their brain on coronavirus market strategies could prove to be a crucial step in landing your next property. 

Finding ways to bring up real estate in my daily conversations has become a personal game for me. I don't force people to hear a drawn out, top of the soapbox, real estate spiel, but you be surprised how many people get excited when I talk about my desire to invest in real estate. And after talking with dozens of investors and agents who are currently creating success during the coronavirus, I can confidently say that people want to help me (and really any other investor) succeed. 

I recently watched an old Steve Jobs interview on success and failure. He said asking for help is the difference between succeeding in your field and failing. Real Estate is certainly no exception. Think about it, have you ever asked an expert for help and had them tell you no? I would say unless you caught them at a bad time, your answer is no. 

And thankfully you've found this website where thousands of Real Estate experts come to help other people they don't even know, sometimes making good money with new investors along the way!   

By doing things such as having lunch with my agent, meeting local investors for coffee, posting to the forums, and making time for quick zoom meetings and phone calls with investors whenever I can, a whole lot of people know I'm looking for an investment property. Now, when people find good deals, they send them right to my inbox. How cool is that!?