Coronavirus Updates

6 Ways the Coronavirus Pandemic Has Changed My Investing Plans

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
133 Articles Written
Coronavirus, covid-19 newspaper headline clippings

It’s hard to wrap my mind around how fast the COVID-19 pandemic has changed our world.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

A month ago I was vacationing normally and enjoying meals out with my wife, albeit with one eye on the news about the spreading virus. I thought masks in supermarkets were a bit alarmist and silly.

Now we’re all sheltering in place, social distancing, wearing masks in public, minimizing our contact with the outside world. Most businesses shuttered. Most homeowner foreclosures suspended, and most evictions either expressly or indirectly suspended due to decrees or civil court closures.

Oh, and there's the roughly $4.3 trillion in combined federal stimulus measures announced in the US alone ($2 trillion passed by Congress, and another $2.3 trillion in lending announced by the Federal Reserve). I'm already bracing for the eventual and inevitable inflation that will hit after the economy recovers. Although admittedly, that might take a while.

So, here’s how I’m preparing financially.

How COVID-19 Has Changed the Way I’m Planning to Invest

1. I’m No Longer Open to Selling Real Estate

I had a nightmare tenant that cost me a shocking amount of money and took six months to remove. The property sits in an extremely tenant-friendly jurisdiction, where I no longer invest for that very reason. In fact, this represents the last property I own in my home town. I planned to sell it and wash my hands of the whole city once and for all.

Not anymore.

keys on a keychain shaped like a house laying on a piece of wood

The buyer base has fallen out of the real estate market. Early data from the National Association of Realtors showed that nearly 48 percent of Realtors reported their buyers withdrawing, while only 16 percent of sellers had done so. And that was back in mid-March—while only a few weeks ago, it feels like a lifetime in the midst of this crisis.

In other words, the balance of supply and demand has tilted suddenly and dramatically in favor of buyers. I expect a buyer’s market for the immediate future until the economic recovery takes root.

So I’m stuck with this property. Fortunately, the property cash flows well. Now I just need to fill it with a reliable renter with a stable job, a task far easier said than done at the moment.

Related: Recession Prep 101: Investing in Real Estate During a Financial Crisis

2. I’m Not Considering Flipping Houses

For the exact same reason, I brushed flipping houses off the table for the moment.

Not that I’m much of a flipper anyway. But my business partner and I had been exploring joint ventures, and possibly even opening it up to our students and audience to participate in as junior partners.

That plan can wait.

3. I Won’t Sell Any Stocks for Capital

My partner and I had some fun plans for joint ventures in rental properties too, again hoping to open them up to our audience to join us. I had some cash set aside for it, and some stocks I was willing to sell for additional capital if need be.

Now those stocks are worth a fraction of their previous value. They’ll recover of course, but it could take a while. And while I don’t mind selling stocks in a bull market to reinvest in real estate, it’s hard to get excited about taking a 20 percent loss on one investment in order to invest it in another for 8-12 percent per annum.

Like most investors, I suddenly find myself with fewer resources at my disposal.

4. I’m More Reluctant (and Less Able) to Take on Debt & Financing

Even as I find myself with less capital to invest with, I also see far more danger in debt than usual.

And less ability to wield it, for that matter. The pundits haven’t talked much about it yet, but we’re entering a credit crunch. Lenders are pulling back, both as their borrowers start defaulting en masse and as their own ability to raise capital evaporates.

businessman hand stop dominoes continuous toppled, Panoramic composition suitable for banners

Remember, mortgage lenders don't just have warehouses of gold coins sitting around like Scrooge McDuck. They make loans, and then they sell them to institutional and wealthy investors on the open market, often through mortgage-backed securities. Even portfolio lenders typically raise their capital through crowdfunding or institutional investors.

All of whom have largely stopped investing. The financial world is largely holding its breath to see how this crisis unfolds.

Many portfolio lenders have suspended new loans entirely. Other lenders cautiously continue lending, with dramatically tighter loan standards. But any way you slice it, it's harder to get financing right now.

Besides, with a deep global recession looming, we all know it will be harder to collect rents on time in the months (hopefully not years) to come. With higher risk of rent defaults, more debt means more danger than usual.

Related: Why Real Estate Beats Stocks During a Recession

5. I’m Pausing New Rental Investments Until Courts Reopen

Landlords have exactly one legal recourse to enforce the terms of their lease contracts: the eviction process.

And that process has been temporarily suspended. Landlords literally cannot enforce their lease contracts.

A shocking one-third of American renters defaulted on their rents in April 2020. A third! And what can landlords do about it? They can default on their mortgages, and almost nothing else.

A dangerous game of financial dominoes. Perpetually-angry housing activists might be frothing at the mouth to foment rent strikes, but they clearly slept through Macroeconomics 101 in college. Tenants don’t pay their rent, landlords don’t pay their mortgages, banks start collapsing, and suddenly we no longer have a global financial system. Or retirement accounts. Or paper assets of any kind.

But I digress. The bottom line: it doesn’t make sense to buy an investment that can’t reliably generate revenue. And make no mistake, rental revenue will be as unreliable over the next few months as it’s ever been.

6. I Plan to Score Some Outstanding Deals

When the immediate public health crisis passes, the courts reopen, and jurisdictions lift their eviction moratoriums, property owners will at least be able to enforce their leases again.

Business women are calculating daily expenses.

With soaring unemployment, landlords will still face a higher risk of rent defaults. But with thorough tenant screening, economically-healthy neighborhood choices, and rent default insurance, landlords can avoid most rent defaults.

I will resume investing, and with a vengeance. Investors will find plenty of opportunities for deals, among sellers willing to accept a low offer in exchange for a fast, guaranteed sale.

I’m not going to accept the kind of deals we’ve seen over the last few years. I plan on some 2010-level discounts.

A Few Things that Haven’t Changed

Despite the sudden shift in the economy, my core investing principles remain as firm as ever.

I believe in both stocks and real estate as the foundation of my portfolio. I dabble in a few other investments here and there, but I invest in real estate for immediate income, tax advantages, and inflation protection. I invest in stocks for long-term growth, diversification, and liquidity. That hasn’t changed.

My stock investments are 100 percent automated through a robo-advisor (I personally use Schwab Intelligent Portfolios, which is free with at least $5,000 invested). I employ dollar-cost averaging: every two weeks, the exact same amount transfers automatically into my robo-advisor account for investing in the same asset allocation.

And despite the typical snide commentary by pundits who love to hate on FIRE (financial independence, retire early), I think crises like this illustrate precisely why more people should be following FIRE advice like saving more money and living on less. Has my portfolio taken a hit during the COVID-19 crisis? Of course. Do I regret my high savings rate and investments just because we’re in a bear market? Of course not.

Quite the opposite, in fact. The more income-producing assets you have, the better positioned you are to weather economic storms.

I have no intention of “retiring” in the traditional sense, ever. I have every intention to reach financial independence within the next few years.

Final Thoughts

The world hasn’t seen an economic crisis like this since the 1930s or a public health crisis like this since 1918.

For investors, that means far greater risks. But it also means far greater opportunities.

How often have you heard real estate investors say, “I wish I’d bought more properties in the early 2010s when prices were so cheap”? I hear it nearly daily.

Tighten your belt, boost your savings rate, and set aside as much cash as you can. In the months to come, you’ll find deals on both real estate and stocks that you’ll be reminiscing about fondly in a decade from now.

Recession-Proof Real Estate book blog ad

How has the coronavirus pandemic changed your investing plans? How do you plan to come out ahead rather than behind, in the aftermath of this crisis?

Comment below.

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
Read more
    Barry H. Investor from Scottsdale, AZ
    Replied 5 months ago
    BRIAN - Well presented segments in this article. Item #4 is especially troubling for me. I am a Turn Key Seller (tenant occupied after full remodel) and I sell with Seller-financing in Kansas City MO. The buyer / borrowers lock in a 20%+ annual ROI with my props (after all Cap Ex and loan costs), and interest in my props has increased in the past month. I am guessing this may be due to tightening lending from banks? Though I do require 25% down, with all the other short/mid term unknowns (tenant anarchy), are my buyer/borrowers just going to drop key on me at some point ? Since inflation is coming, should I just go backward in the evolutionary chain and be a rental owner again since rents and house prices will both eventually increase? That makes more sense than 10% Int Only mailbox money in the mid/longer term ? More questions than answers !! Thanks again for making me retrospect and possibly begin a future plan with more diversification.
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Hi Barry, I hear you on the all the unknowns. We live in uncertain times. But I do think that owning real estate makes a great hedge against inflation right now, and it's worth at least considering diversifying into some rentals again.
    Christopher Smith Investor from brentwood, california
    Replied 5 months ago
    Can you say "quality tenants." So far I'm at 100% occupancy and at 100% on timely rental payments. My managers typically don't cut corners in screening for only the best tenants and since my properties are in the best neighborhoods I'm feeling OK. However, I'll be keeping my ears to the tracks and hopefully this thing won't spiral out of control feeding on the hysteria of the uninformed and emotionally unstable.
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    That's great to hear Christopher! Glad you're seeing strong performance among your tenants. And it goes to show the power of thorough tenant screening.
    Wenda Kennedy JD from Nikiski, Alaska
    Replied 5 months ago
    Thanks. You've made several important points. I'm always preparing for moments like this. I'm into owning assets rather than having loans. I like to do things out of cash flow. The other landlords around me have been making fun of me for years. They've repeatedly told me that I don't know what I'm doing. My growth pattern for my investments has been slower than other investor's business models. Yes, these are tough times. This is my 5th business cycle since I started in the real estate business in 1976. Every downturn has looked different, but they have been equally difficult. This crisis has a few elements from those past experiences. My biggest concern is for those investors who have high LTVs (loan to value ratios). In a moment when we can't evict our tenants and enforce our rental contracts, I believe that those high levels of debt can and will sink a lot of investors.
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Glad to hear you're well positioned Wenda! And there's nothing wrong with a more cash-oriented investing strategy. Every investor has their own risk tolerance, and sleeping at night trumps numbers on paper.
    JL Hut Investor from Greenville, Michigan
    Replied 5 months ago
    I also started in 1976, about 20 years ago I when to cash purchases only, with AA properties, no leverage. Much slower, but I sleep better at night. Every time I read a story about somebody buying 100 or 200 doors a year I wonder how they doing down turns. I don't need that kind of stress. JL
    Terry Lowe
    Replied 5 months ago
    Wendy, like you we are fortunate to own our assets. That makes it difficult for me to see how investors with high debt will survive. Good, reliable tenants will be very helpful in this crazy economy. I hope all tenants and investors can come out of this without losing too much. I believe educating tenants is the best hope of receiving rents. Out of work tenants who are receiving unemployment and stimulus checks should be able to pay rent, but many will need some financial advising. It will be the property managers job to “put on a new hat” and and tutor tenants. It will be a life changing experience for some tenants, and we can be proud to help others see how it can improve their life now and after this crisis is resolved. Wendy, our son a fam live in Anchorage. As soon as we can, we will be coming to visit and fish. I will try to look you up!
    Toks Akindele
    Replied 5 months ago
    Guys, we shouldn't get too carried away with the situation the Pandemic has caused. Please note the following: 1) The LENGTH (TIME) of this problem is going to be probably till mid June; it will be warmer then and most flu bugs can't survive the heat. Flu however will start around October by which time there will be a vaccine or at the minimum a drug to take for this Covid-19. So the TIME of the downtown is important to consider in your analysis before you do anything rash. Heat kills the Covid virus...I know because I just survived it (that's a long story) 2) Apart from the duration of this slowdown, one thing you need to pay attention to is CONSEQUENCES of outcomes. You can be rest assured that the US government won't sit idly back and watch the US economy tank especially when there is a window of opportunity to overpower the virus by developing drugs and/or vaccine by October. They will provide a lot of money for vaccine research. This is why China is trying to start their economy despite still having cases of the virus....they don't want to lose their momentum. So if you agree that the US economy will not be allowed to tank and you look at the TIMING I stated above, then you should go forward and pick up good assets. This is like the infantry soldiers going to a firefight behind a tank. The US government is your shield for this short timed pandemic. 3) Point #4 from the initial thread talked about scarcity of debt financing...definitely true. But just like the US economy won't be allowed to tank, these financing companies also don't want to go under. What these means is that investors with good credit will be calling the shots. They are the ones who should go out there and pick up assets; it will be a mistake on their part to retreat. Warren Buffet said something like "Dive in when others are heading to the hills....." 4) Quality Renters that can pay their bills and that need a place to live will move whether their is a recession or not. The article also rightly pointed out the difficulty of eviction...which means renters with financial difficulties are stuck where ever they are currently i.e. a renter not paying rent or who can't afford to pay rent is not going to be out looking at moving or renting. An investor who brings a new property online now will only have these quality renters to choose from. There will be a slower activity of renting of course, but note that vacant inventory didn't increase either; so it will be a perfect situation to get quality renters. Shelter is important to us humans. 5) The short TIME of this pandemic as I had mentioned earlier will probably help investors with high debt. Note that there are lots of companies in the US economy in various industries that have a high debt load; I think it is going too far to say these companies will go under because they couldn't service their debt till June. The lender doesn't want to go through all that hassle and it is likely they will negotiate something. TIME is their friend. 6) If we are not ready with a drug or vaccine by September, I will then advise all investors to run to the hills too. So buy stuff now and rent them out to those quality investors before September, but watch the news to see the medical breakthroughs happening. If there are no medical breakthroughs, then don't buy anything starting September since we won't have any medical solution to the virus when it comes back in October So if you are an investor with good quality ratings, this is the time to press forward intelligently. The article said it is a buyers market, so go pick good assets.
    Nathaniel Lawson
    Replied 4 months ago
    Folks this economy had severe underlying flaws even before the pandemic. Saudi under cut the US shale market causing most us oil producers to go out of business contributing to unemployment and causing the US to be more oil dependent. 40 million people have filed for and are receiving unemployment benefits, approximately another 5 million applications for jobless claims are waiting to be processed and 5 million folks have stopped looking for jobs. Approximately 50 million people are out of work, we have a pandemic we’re dealing with and our military readiness is at it’s lowest point in decades. Citizens are not going back to work in this uncertain environment and it will take years to restore consumer confidence. The unfortunate thing is this administration has no plan to address any of these issues and believe me I don’t have room to list all the problems and they’re all major ones. Unfortunately Americans are being lied to in order to prevent wide spread panic because we don’t have a leader to articulate America’s problems and because of his lies the confident he can lead us out of the monumental problems where’re facing. America’s in danger of becoming a modern version of the Roman Empire! We’re at the end.....
    Susan Maneck Investor from Jackson, Mississippi
    Replied 5 months ago
    I'm thinking just the opposite, Toks. It may well die down during the summer months, more likely July and August, not so much June. Schools will likely open up in the Fall only to shut down within a month or two. We're not going to a vaccine that soon. Maybe by January. I'm surprised to hear a third of tenants haven't paid rent yet. I've only got one tenant still to pay and they haven't received their Stimulus check yet. Afterwards their unemployment enhancements will cover their rents. I don't expect any more problems until August or September. In the meantime I've done small things to help my tenants like buy cheap chromebooks so their kids can get their schoolwork done. Otherwise I'm pretty much doing the same as Brian but I'm watching the market to see if deals pop up I just can't say no to.
    Toks Akindele
    Replied 5 months ago
    Susan, A vaccine could take a long time to be developed but I am confident that a viable treatment protocol will be developed by September i.e. there will be a drug by September. If people have a drug to take, then the Covid worry goes away since if you are infected and you take the drug, you now have immunity. Note that the Flu shot people take right now is just a vaccine with a 1yr effectiveness; ask yourself, how many people in the US take flu shots. People who don't take flu shots just take the chance and use drugs if infected. So I would still say Covid will be not as menacing by Sept. Any investor who has good credit should go out there and buy assets but pay attention to the medical news by August to see if a drug has been developed.
    Joe Cassandra Flipper/Rehabber from Woodstock, GA
    Replied 5 months ago
    Nothing about an economic downturn has anything to do with"finding a cure". The damage to economy will happen regardless when there is a vaccine. And a vaccine won't be available until 2021 minimum according to at least Bill Gates (who predicted the pandemic
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Definitely no need to panic. It's a good time to buy, if you have the capital to do so!
    Mark JOhnson Investor
    Replied 5 months ago
    My thoughts are similar to yours. I told a student of mine to hold back on purchases in March and be liquid. As I see it, whatever amount this virus costs my business today, I will make 10x over in the future because I've had a plan all along. Failure is not having a good plan of action.
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Absolutely. There will be plenty of opportunities over the next year or two. We all just have to do our best to stay financially stable in the immediate crisis, so we're able to capitalize on those investments.
    Kenan Heppe Rental Property Investor from LA/Portland/Beijing
    Replied 5 months ago
    Hey Brian! What metrics do we look for to determine if it's a good time to start buying? When can we be more confident we are in those "2010 discount level" moments?
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Hi Kenan, I'd base that on profitability, whether you're looking to flip or buy and hold. Also, keep an eye on the regulatory environment (i.e. eviction suspensions), and the local market for selling and renting homes. Make sure there's enough demand!
    Kevin Zolea New to Real Estate from Parlin, NJ
    Replied 5 months ago
    Great article Brian!
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Thanks Kevin, much appreciated!
    Mike D'Arrigo Turn key provider and podcast host from San Jose, California
    Replied 5 months ago
    Brian, we're seeing a much different picture in Indianapolis and Kansas City where we are active. It's still early but the March metrics are still very strong. Median prices are up year on year, pending sales are up year on year, days on market are not growing and sellers are still getting their asking prices. Our Kansas City property manager is reporting very few people who have said they can't pay there rent in April and only a small uptick in the number of people who were late with the rent. I think this is going to vary market to market.
    Jeff Bosaw Rental Property Investor from Saint Louis, MO
    Replied 5 months ago
    I think true metrics will start showing up in the next 2-3 months. March sales likely happened in February house finds and 30-day closing time frame. This would be well before the full pandemic hit the entire US specifically midwest. I noticed lots of price reductions lately on Redfin and Zillow during the springtime when houses usually sell at their peak.
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Glad to hear rents are flowing in your markets Mike! And you're absolutely right - there's no such thing as a national real estate market. Conditions vary market to market.
    Rebecca Jackson Rental Property Investor from Dallas, TX
    Replied 5 months ago
    Things are looking very strong in DFW markets. I expect once the state opens by end of month Texans will bring back that confidence we all know and love! However, just like the last downturn, the impacts of this will be seen over years, not months. There will definitely be a buyer’s market shift, especially for those with good credit and low DTI.
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Thanks for the local perspective Rebecca! And I suspect the economic impact in Texas will be less than many other regions in the country. Hope you find plenty of good opportunities!
    Aaron Hollingshead Flipper/Rehabber from Roswell, NM
    Replied 5 months ago
    Brian, what an excellent article. I loved it. I have a flip property that I am selling that went under contract on April 10th (the day I listed it). We did a 45 day close, though frankly I have very little hope it will happen in that time frame. I would call it a huge success if it sold within 60 days but I'm already thinking about the possibility of renting it out if I can't get it across the finish line in 90-120 days. Four months ago, I had 4 flips going on simultaneously while currently I just have the one above...if COVID-19 had happened 4 months back, I'd probably be feeling much more stressed about the whole situation! In the last week, I've made two offers to purchase properties (1 as a rental, 1 as a flip). I am not offering any more aggressively than before, but I know my financing is still in place and I'm employed still so I figure I may as well just keep plugging along. Thanks again for the awesome blog post!
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Glad to hear you're in a good position Aaron! Best of luck in the months to come.
    Timothy Smith Investor from Buffalo, NY
    Replied 5 months ago
    Thanks so much for this writing, Brian. I'm still relatively new to the game compared to many, but am trying to position myself to take advantage of deals coming along when this is done. Our April rent roll was 100%, but I don't anticipate that moving through the summer. We were in the middle of acquiring a SFH flip project minutes from my own home when everything hit the fan, but quickly changed gears to make it a Buy & Hold -- at least short term. Your comments about flips and holds right now make me a bit nervous, but we were diligent with our numbers to make sure this purchase would work as a flip, hold, AirBnB, or even short-term lease. We are using a private lender for half of the project, and our own cash for the rest. Once the rehab work is close to complete, I'll take the temperature of the current market and decide if we list it for sale or for rent -- or both! There is a strong possibility my W-2 income for next year will evaporate, or at least take a significant cut (musician), but if the local SFH market stays somewhat respectable, I may be able to still flip the property and make up a portion of my lost W-2. I'm reading all the "Gloom & Doom" articles and podcasts, as well as the ones that encourage us to be diligent and capitalize on the opportunity. Trying to stay positive and embrace the situation as forced diversification has really helped my outlook lately! Thanks for your article and encouraging outlook.
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    So glad your April rent roll was 100%! It's definitely an unpredictable time, so stay diligent, and good luck!
    Kevin McGuire Rental Property Investor from Seattle, WA
    Replied 5 months ago
    Great article Brian. These are all very reasonable plans. It's basically impossible to make predictions right now because we've never seen a situation like this and so many factors are difficult to gauge: on the medical side there's effective therapies, testing availability, timeline for a vaccine, and immunity, then on the economic side there's the both positive and negative impact of the unprecedented government financial intervention, as well as long term knock-on effect of unemployment. I think one first has to really internalize the uncertainty. One then has to make decisions given this uncertainty. For example, not doing fix and flips is wise since there's such huge short-term risk. To your point about FIRE, managing spending and debt, the bedrock of financial prudence, is the real key because that's what lets you sleep better at night and broadens your choices even during the worst times. That to me defines financial freedom. A clear strategy, and patient, steady hand executing that strategy are most valuable in a crisis.
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Thanks Kevin, and you make a great point about internalizing risk right now!
    Summer Cherry Real Estate Agent from Manchester
    Replied 5 months ago
    All great points here that reassures my plans for investing as well. I missed the 2010 boat because I decided to start a hot dog stand instead of buying an income property. What I know now is that I need to get ready to buy when the market bottoms out discount properties. That's why I am getting a cash-out refi, cashed out my whole life insurance and ROTH IRA penalty-free, and reading/studying RE as much as I possibly can to be prepared. Thanks for the sound advice!
    G. Brian Davis from Baltimore, MD
    Replied 5 months ago
    Thanks Summer! I'd be remiss if I didn't say that it's all speculation about what will happen in the housing market, and that different local markets will be affected very differently. There may not be a significant drop in home prices nationwide. Although I do think there will be some opportunities for distressed sales. Best of luck with your investments!