The Impact and Predictions of the Coronavirus on Real Estate Investing

Since mid-March when the Coronavirus brought the world to a halt, I’ve received countless questions about how the real estate investment industry would weather this storm. Over the last 30 years, I’ve worked in real estate. I’ve seen the business impacted by wars, recessions and natural disasters. Yet, through it all, real estate has reemerged as a proven and longstanding business.

In these unprecedented times, I cannot predict the future. But, I can offer my educated views based on my experience over a lifetime of investing.

What We Know from Past Recessions

The economy is suffering, and we are currently in a recession. However, our current economic state is much different than previous recessions or depressions. For example, the recession of 2007-2008 developed from economic and financial markets issues.

In contrast, up until the impact of COVID-19, the economy thrived this year. The real estate sector was strong in the first quarter of 2020. Unlike in the 2007-2008 recession, current market conditions should not produce massive asset repricing.

Likewise, the country went into a recession in 2001 from the impact of the terrorist attacks on 9/11. That recession differed from the 2007-2008 recession and may aid more in understanding our current economic situation. In both 2001 and today, external factors triggered the recession instead of economic factors.

In 2001, the real estate industry remained strong and prices increased over the next year by 4.8%. This was despite shifts in the rest of the economy.

Current predictions for our present economic impact are a short-lived economic response, likely two quarters. Once the country starts to recover from the pandemic, the economy should quickly get back on track, this includes real estate.

The Effects of the Coronavirus on the Real Estate Industry

The recent real estate boom has meant that property owners could demand higher prices. Most property owners weren’t motivated to reduce prices because they were in a financially solid place. These high prices made it very difficult for investors to negotiate and receive beneficial deals.

With current conditions, more property owners need to liquidate for fast cash. With high sudden unemployment rates, more people can’t pay their mortgage. Property owners are scared and need to move to a more affordable financial plan.

As sellers enter the market with more affordable prices, real estate investors can grow your portfolio.

• Buy and Hold – Rental demand increases during a financial crisis. Vacancy rates have been at an all-time low for quite some time. Demand for rentals will likely increase.
• Wholesaling – The supply of off-market properties increases during financial downturns. Sellers become more motivated and reasonable with price expectations.
• Fix and Flip – More buyers will want houses in the "sweet spot" price range. Due to historically low interest rates, mortgage payments are more affordable than rents making rehabilitation of distressed properties in the "sweet spot" price range crucial to meet the increased demand.

Many cities across the nation have experienced recent housing shortages. Over the last 10 years, the real estate industry had historically low new construction. This means that even though the economy has shifted, people still need housing.

Adjust Your Strategy to Meet Current Market Conditions

Remember, we are in a time of temporary crisis. It is important to stay calm and make wise decisions for your business.

As a real estate investor, look at the opportunities for growth. With the increase of properties for sale priced at more affordable rates, now is a great time to invest. At the same time, there is less competition from other investors entering the market.

Many potential investors put plans on hold. They are waiting to enter the industry when the economy feels more stable. Don’t wait, consider the benefits of smart investments, and seize the opportunity. As for me, in past recessions, I made more money than during regular times.

With government regulations restricting certain businesses depending on your local government, virtual real estate investing is a solid option. Virtual real estate allows you to grow your business despite social distancing and essential business requirements.

Also, with virtual real estate you can invest in markets outside of your geographic area. Consider which markets have the most potential and invest. With the right strategy, you can exponentially grow your business much faster and in less time.

Even with the country shutdown in many areas, your business can move forward. Don’t allow fear and panic to control you or your business decisions. Stay safe, but also take advantage of this time to invest in your real estate business.