Looking Forward Past This COVID-19 Crisis – some concrete advice

Dated: March 29 2020

Views: 400

I’m not going to bore you by repeating what you may have heard from many advisors: “Don’t worry we will get through this.” You, like me, are tired of hearing this. You need concrete things to take a bite of, digest, and act upon. What will things be like when we do, indeed “get through this”, and what should you be considering? (Keep in mind I am Real Estate Centric).

First some economic principles that are important.

Supply and Demand. This basic economic law never fails us. Scarcity raises prices, increased prices raises production that then increases inventory,  and then prices will decrease. Decreased demand lowers prices (think oil), production decreases as profits lessen, and then another cycle returns.

Opportunity Cost. Cost isn’t always about money, it’s often about If I do “this” I give up “that”.  One opportunity must preclude another.

Ok, this is not an economics lesson, but I don’t want you to lose sight of these two principles that stay in effect even during a crisis. If you are evaluating an action that is taking place (like people not driving much) it’s easy to see that gas prices will drop.

During this crisis I am getting questions such as: Should sell now or wait? Should I buy now? What will happen to real estate as we recover?

Some things I believe:

Real estate is an asset that you will want to own when all this printed money causes inflation.  You will need to rather quickly own things that appreciate and not have cash that will depreciate. Gail and I were looking to take some money from our portfolio and buy another rental property, (build a duplex in fact). The current crisis caught us looking. We didn’t pull the trigger it time.  Is it too late? No. This is still a good time to buy rental property Prices of (the right) real estate will go up.

Mortgages.  Should you refinance?  There will be many people not paying their mortgages over the coming months. Lenders have been in a refinancing frenzy lately and have raised rates, not because of the cost of their money, but because of supply and demand.  After consulting with our EXP mortgage advisors I gave the following recommendation to a client yesterday: Refinance, but not at market rate, jointly come up with a plan with your mortgage broker. Fill out the paperwork and together set a rate that makes sense to you. Because of the combination of COVI-19 and the refinance activity, rates are all over the board. Shoot for under 3% for a 15 year and sub 3.5 % for a 30 year. Tell him when it gets to that rate, you will pull the trigger. (today is March 29, 2020).

List now or wait? The thing about trends is we can only see them in the rear-view mirror and not though a crystal ball. I say list now but set your expectations with your real estate agent accordingly. Sell at a price that is right for you (remember opportunity cost – the cost of NOT selling -  in this case). But right now, buyers are expecting special deals and desperation sells. So stay in tune with your agent and continue to watch comps. In the geo market you are in, homes will sell at the mid to bottom price ranges.   Let me be clear, when I say now,  I mean within the next month of so.   (BTW – virtual tours are more important than ever – real 3D ones. Here is one of a home I listed last week)  Many folks are not listing now – so think supply and demand – get your home on the market, get your virtual 3D tour done, and use the down time at home to get your house ready. By the way, there will be many agents that know of houses that are going to come on the market. I know I do. So communicate with your agent and let them know what you will be looking for when you're ready.

Everybody is like me. My entire career I have had a theory - I always thought that my buyers were like me. When I was a young man I was selling to young couples; now that I’m a pre retiree I'm selling to pre retirees.  Furthermore, if you are thinking it, many other people are thinking it as well. It is best to be overprepared and move early. My point here is that you are not living in a vacuum. Think about what you would be doing if you were your customer. If you were thinking of downsizing so are many other buyers and sellers. If you are thinking of selling your second home so are many other sellers. If you are thinking of putting your money into investment real estate, so are many other investors.  You will be more successful if you are more prepared and goal driven.

Investment Real Estate. Now is a good time to plan your real estate investment strategy with your agent. If you have been a reader of mine for a while you know I am big on build to rent properties and I  like single family homes and duplexes. Contact me if you would like to see a scenario that might work for you.  This is a good time to start that process.

Money. I do not believe the cost of money will get lower than it is now. But this is also not a good time to take on large  leverage. It's a time to hunker down, pair expenses, and plan. These days I live on Zoom meetings and in our virtual Exp World. It would be a pleasure for me to set up a Zoom meeting with you to discuss your concerns, your goals, and your real estate needs.  Call or test me anytime at 239-851-5464

 

As many of you know, I joined Exp Realty about one year ago. What a great time to be with a real estate company with no overhead from bricks and mortar. I'm so glad I no longer have rent to pay and an office that I have to upkeep during these trying times. If you would like to work with me in the real estate business I'd love to talk to you.

 

Stay safe and be healthy.

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Gregg Fous

Real estate has been my passion since I took my first Al Lowery class on real estate investing in the 1970’s. I vowed during that class that I would buy one property a year. Over the next five ....

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