5 Principles for Investing in Uncertain Times

5 Principles for Investing in Uncertain Times

3 min read
Nate Shields

Nate Shields is a real estate investor and real estate investing coach.

Experience
Nate started in real estate in 2013 part-time as an agent and quickly went full-time, enabling him to quit his 9 to 5. After a couple years in the business, he found BiggerPockets and developed an appetite for real estate investing.

After consuming all the podcasts, Nate and a partner lined up financing and purchased a property at auction. In just two and a half years, they had 25 units in three states (a mix of single family, small multifamily, and larger multifamily). Nate also started flipping properties on the side.

In addition to continuing to add properties to his portfolio, Nate enjoys helping new investors get their first deal. He does this through articles, his YouTube Channel, and one-on-one coaching.

Press
Nate was a guest on the Real Estate Investing 365 Podcast (show 15) and featured in Illinois REALTOR® Magazine.

Education
Nate graduated Magna Cum Laude with a bachelor’s in Biblical Studies from Judson University.

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For the last three years or so, many investors have been asking the question, “When is the next recession going to happen?”

My take on it was that it was going to be caused by something unknown or unpredictable.

More specifically, I was thinking a war somewhere could cause some global uncertainty and plunge us into recession. Recently, that tiff with Iran looked like it could do the trick. But it ended up being something even more unpredictable: a war on a virus that knows no borders.

While there were some other troubling aspects of the economy, such as student and consumer debt, the coronavirus is proving to be much more destructive so far. We went from an extremely low unemployment rate (under 4 percent) to a spike (and continued upward trajectory) in unemployment almost overnight.

If you are a landlord, you must be thinking of your tenants’ ability to pay rent right now. Just last week we were talking with our property manager and putting together a plan to raise rents to market rates. Now that has been put on hold. Many landlords are offering incentives, credits, or even waiving rent next month.

Related: Dear Tenants—I’m Sending This Letter to My Tenants Today

There are a lot of other questions out there, as well. While the real estate industry hasn’t been hit hard yet, we’re starting to see deals fall out of escrow, sellers wait even longer to put property on the market, and investors wondering if that deal they’ve got locked up would be better put on hold.

Some sellers may panic sell to liquidate assets, but I haven’t seen that quite yet. I’d love to hear in the comments what you’re seeing in your market though!

All this to say, these are uncertain times. So, how is a real estate investor to navigate the treacherous waters ahead? Here are several principles to help you shape your investing strategy in times of uncertainty.

Investing in Uncertain Times: 5 Things to Keep in Mind

wheel of ship against a dark cloudy sky while raining

Principle #1: Have Patience

Since we can’t predict the future, patience needs to be exercised. If things are worse than expected, then the market may not bottom out for some time. We’ll need to be patient as landlords, as well.

Related: Landlord Emergency Preparedness 101: What Real Estate Investors Should Do Before Disaster Strikes

Principle #2: Look for Opportunity

Times like these are when wealth is created. Many people, myself included, wish they would have bought up properties between 2009 to 2014 (give or take). Here’s an oft-cited quote from Warren Buffett:

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Current market movements imply many investors are fearful, so be on the lookout for opportunities.

Related: 5 Ways the Next Recession Can Make You Rich

Principle #3: Be Prepared

If you have income-producing properties, hopefully you have reserves set aside for circumstances like this. If not, then hopefully you have some equity to fall back on.

For those who wish to acquire properties—and have the means to save or raise money in the meantime—now is the time to prepare for those opportunities that will most likely be coming down the road. (Of course, the optimal time to prepare is always two years ago.)

Principle #4: Continue to Learn

You should constantly be learning. But in times like these, it’s important to learn from your mistakes or assumptions you’ve made in the past.

A woman holds a red umbrella on a fishing pier during a storm.

The last few years, I thought that affordable housing was bulletproof (or close to it). My rationale was that even if a recession were to hit, the more affordable a place is, the more likely there is to be sufficient demand to maintain solid occupancy rates.

Now I’m not so sure. Blue-collar and hourly workers are most likely to be affected by the latest circumstances, and they are the ones to most likely be renting “affordable” housing.

The average American is already in a tough spot when it comes to having an emergency fund. Those at lower income levels, even more so. If they are out of work for one, two, or more months, then the property owners who offer affordable housing may have a predicament on their hands.

Further, with schools now closed and children at home, the burden is on parents to care for their children first. Working from home and seeking out new employment will prove difficult.

Those with white-collar jobs or the ability to work remotely uninterrupted will be far less affected—unless the ripple effect in their particular industry hampers their ability to earn.

Principle #5: Be Optimistic

It’s important during tough times to maintain a sense of optimism.

I’ll be honest. This has been hard for me—I don’t like the disruption of routine and being told what I can or can’t do.

But we can’t dwell on the negative. This too shall pass (hopefully quickly). We’re in this together, so let’s put on a brave face, help each other out, and come out on the other side stronger, more resilient, and more grateful.

Recession-Proof Real Estate book blog ad

What principles do you live by in uncertain times? I’d love to hear about them!

Leave a comment below.