CoronaVirus Impact on Real Estate Investing

The CoronaVirus is spreading rapidly and just about every industry is feeling the impacts. What is COVID-19 doing to real estate investing? Discover not only what it is doing now, but also how it may affect real estate investing in the near future. Whether you are investing in real estate now or plan to be soon, watch this video now! Also, due to the rapidly changing landscape of this pandemic, here's an additional update on how it's impacting real estate too: 5 Tips for Investing in Uncertain Times.


 

4 Coronavirus Impacts on Real Estate Investing

 

Impact #1: All-Time Low Interest Rates

This is arguably the most significant coronavirus impact on real estate investing. We currently have the lowest interest rates in recorded history. This means that the interest rates right now are lower than they were during the bottom of the of the great recession.

A Good Time to Refinance:

This has a huge impact, and it's particularly good for you as a real estate investor. Why? Well, first and foremost, it's a great time to refinance. If you haven't refinanced in a while, now's the time to do it. You will get about as low of an interest rate now as you'll ever get. You're paying less in interest which means you get to cash flow more.

A Good Time to Be a House Flipper:

If you're a house flipper like me and the many people that I mentor, it's also a great time to be flipping. The low interest rates make houses slightly more affordable. As a real estate investor, you can end up investing more in a house than you anticipated. This means you need to sell it for slightly more than you originally planned. Depending on competition and comps, you might be struggling to sell. The good news is that because of the dropping interest rates, it will be a easier for you to sell.

 

Impact #2: Money is Pouring into Safety

If you’ve been watching the stock market right now, you will have noticed that money is pouring into safety. Part of the reason why the interest rates have dropped is because so many treasury bonds have been purchased by equity investors. When money is moving into safety, it means it's also moving into real estate. Here are a couple examples of how this can benefit you as a real estate investor.

A Good Time to Sell Under-Performers:

First, if you have a long-term hold investment that's never performed very well, now would be a good time to sell it. A lot of these retail investors that are moving away from equities and the stock market might want to purchase real estate.

A Good Time to Raise Private Money:

When money is pouring into safety it’s a good time to raise private money and try to pick up funding for deals for slightly less than what a hard money lender would charge. There’s a lot of competition for hard money. I have a great video on the fundamentals of hard money lending, but now might be a time when you are be able to skip over that and go straight to private money. Money that's coming out of equities and going into the safety of real estate.

 

Impact #3: Reduced Access to Materials

There is a reduction of imported building materials coming out of China and other areas, which will significantly hinder builders. Unfortunately for builders they are already being slowed down for a lot of different reasons. Slowing down builders is only helping us as real estate investors because it's lowering the amount of available inventory.

Low Inventory:

When we have low inventory, it allows us to flip our properties a lot faster and having more buyers than sellers allows for multiple offers situations. However, there's more to it. Low inventories, specifically with single family homes, are good for long-term rental investors because people need a place to live. It means that your rentals are occupied a lot faster and stay occupied. That's what we love so much about being residential real estate investors. Lower inventories make it easier for us to flip our properties at full price and it allows us to get our vacancies filled a lot faster.

As real estate investors we love low inventories, however there's a catch I want to explain. Inventories are only incredibly low at affordable price points. As the price point goes up, inventory levels start to skyrocket. It depends on the area and the medium, but as you start getting well above the medium price point of a house suddenly the inventory shoots up. So as a real estate investor, you need to focus on affordable, lower price point houses to either flip or rent. That's where the game is being played right now.

To learn more about understanding inventory I have a separate video you need to watch called Three Factors to Understand Your Local Real Estate Market. I also have a great video I put together in 2016 called Now's the Best Time in the Last 40 Years to be Invested in Real Estate. What's so interesting about that video from four years ago is it's truer now than it was four years ago.

It's exciting because we have the winds in our back from every direction. I never thought I'd live to see a situation this good. I've shared a lot of positive impacts with you, however there is one negative.

 

Impact #4: Vacation Rental Slowdown

There is a slow down coming for vacation rentals. In fact, Airbnb has already announced that in those areas most impacted by the outbreak of the coronavirus, there would be a no questions asked refund to any potential guests checking in regardless of what their lease agreement said.

The slowdown is coming because less people are traveling. I have most of my holdings as a vacation rental investor in Florida and Tennessee. I personally haven't seen any slowdown or anyone cancelling yet but I expect it to be coming. I’m not too concerned about a temporary slowdown because I have huge margins in my vacation rentals, and I have a gigantic reserves. However, you might be on razor thin numbers so it could be something to be concerned about. This will have a negative impact. I'm going to feel it and those of you that are a vacation rental investor like me, you will too.

There is a potential opportunity in this is if it is prolonged. At some point, vacation rental investors might panic and be willing to sell properties much cheaper than they should. We don't want that to happen to vacation rental investors, though. We wish them all the best and we hope they can ride out this temporary storm.

Conclusion:

These are the 4 main coronavirus impacts on real estate investing at the time of this writing (subject to change, of course!). As you can see, the first three are very positive for real estate investors. However, as a vacation rental owner you'll experience a temporary slow down. For more information on any new developments go to: Real Estate Investing During CoronaVirus Pandemic.

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Comments

  1. Babatunde Olusola says

    Hello Phil,
    i just stumble on your video and it is a real blessing to me. i really love to be mentored.

  2. Hey Phil,

    In the weeks that have passed since this video one big issue needs to be addressed. The unemployment rate. Who is going to go out and buy in a recession when many are unemployed or may become unemployed in the near future? The government might try to help but that is just going to be enough to cover necessary expenses.

  3. Hi Phil, if anyone actually died in their house or even had the infection and then died and they lived in a place not necessarily a house it could be an apartment wouldn’t they want to condemn that property? Like how would anybody want to live there? That’s worse than having a murder in a house or methamphetamines.

    • Freedom Mentor says

      I can’t imagine the reason to condemn a property for this reason. There are many companies that offer mitigation services for most issues. Do your homework if you are investing.

  4. Matt Soeter says

    Unfortunately what’s happened in China has been pretty bad. Sales volume dropped by 90%, as of mid-February. And real estate marketing groups were projecting that this would be affecting prices directly as well.

    I like your positive mindset, Phil — it has obviously done you very well. But we don’t really know how Coronavirus is going to play out in the US. The CDC and WHO are predicting we’re going to have an epidemic here, and so I feel it’s going to affect not only the whole economy for a short time, but possibly push us into another recession or even worse. The Fed is pretty much out of bullets, so it’s going to be pretty bad. Keep your powder dry though, for those long-term buys if the market drops dramatically.

  5. Al Aimers says

    Phil, over the years I have listened to many real estate investors and my wife is addicted to HGTV.
    We retired 3 years ago and live comfortably on our investments and SS.
    I spent my entire career in the industrial mechanical construction industry as an estimator/construction manager. My spare time is mostly spent playing golf but I have finished five basement projects and about every home repair imaginable.
    I enjoy the projects and prefer to work alone. My wife likes watching HGTV shows and occasionally will get a project she’d like me to do. She does not have a construction or design bone in her body.
    That being said at age 68 would I be foolish to risk our retirement on possible rewards?

  6. Tade Ijagbemi says

    This is highly informative but can we then say that the reverse would be the situation when the virus is eventually conquered and normalcy return?

  7. Thank you Phil for Sharing, May God Continue
    To bless you as you bless other.

  8. Carl L Johnson says

    Very good video and info. The problem that I’m seeing is people are hoarding water and toilet paper!

  9. Mitch Hawkes says

    Phil, when you teased this video with your “freak-out” face, I knew you were about to deliver mostly happy news to the real estate crowd.

  10. Robert shemin says

    Great job
    Miss seeing you
    Congrats on all your success

  11. John De Rossi says

    Hi Phil just watched your video on the impact of the virus on real estate and made so much sense. Through the years been watching various other videos about real estate investing and I was wondering how I can become an apprentice I’m totally green but do have a working knowledge is it possible to get more info and what I would have to bring to the table

  12. Patricia says

    Where can I see your other videos mentioned in the CV Impact on RE video? Thanks!

  13. Fernandez Luckett says

    Hello Phil. I enjoy your teaching you are who you say you are.
    I have a question on the coronavirus.
    What if my building we’ll say 10 units has an outbreak or something like. No one would be able to go to work how would they pay their rent and would my insurance be of any good?
    Thanks
    Fernandez

  14. Jai Jones says

    Thanks for the info.
    By chance the coronavirus really gets out of hand and people can’t work due to illness or job shutdowns, how will people be qualified to purchase properties, let know pay their rent.

    • Phil Pustejovsky says

      I’m no medical expert but from what I have researched, it appears to be quite similar to the Flu and therefore it is fatal to a tiny fraction of those that are infected. Therefore, the vast majority of people will still be able to function long term; even if there are some temporary attempts to quarantine (such as not docking a cruise ship).

  15. Sulaimon says

    It is a great eye opening. Please how can I get involved.

  16. Shelton Walker says

    How do I get into your program?What do I have to do to purchase the real estate book?

  17. AleisaSaunders says

    I’m interested in the apprentice program. Can you please send me an email with some information on the exact process and success rate of the apprentice program.

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