BiggerPockets Money Podcast

BiggerPockets Money Podcast 117: Coronavirus Q&A with Scott & Mindy

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Today, Scott and Mindy discuss the biggest news story of the century: coronavirus or COVID-19.

This episode covers a wide range of topics, both money and real estate—with a guest spot from Brandon Turner.

Brandon answers the number one question on every real estate investor’s mind: “What do I do if my tenant(s) can’t pay rent?”

You’ll also learn about the resources that are available for people whose incomes have taken a hit and get answers to questions such as:

  • Should I continue with the purchase of a property I have under contract?
  • Should I continue to pay down debt or take advantage of this current market?

These are scary times, and it can be easy to cut and run or throw out your carefully-laid plans in favor of an instinctive reaction. So, now is a good time to detach, assess your options, and chart a course forward.

If you have coronavirus fears, you’re not alone. Scott, Mindy, and the entire BiggerPockets Money community are here to help you weather this storm.

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Scott:
During tracking your spending. When you’re just adopting naturally frugal outcomes that prioritize your financial well-being in the context of your happiness. I think you’ll find that your happiness is not going to change whatsoever, but a magical thing is going to occur in your bank account where you’re going to start accumulating a much larger surplus. Right? And you’ve heard this a million times in the BiggerPockets Money podcast. How many guests have said the same things that we’re just talking about right now?

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Mindy:
Hello, hello, hello, and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and with me, as always is my self-quarantining co-host Scott Trench.

Scott:
How’s it going?

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else and show you that by following the proven steps you can put yourself on the road to early financial freedom and get money out of the way so you can lead your best life.

Scott:
That's right. Whether you want to retire early and travel the world. Just navigate this recessionary environment or the predicted recession, the Coronavirus self-quarantine, whatever it is, go on to make big-time investments in assets like real estate or start your own business. We'll help you build a position capable of launching yourself towards your dreams, but at the very least staying afloat in your recessionary environment because it's the same thing.

Mindy:
There are things we each look back on and think, how did I get it so wrong? It might be wearing multiple polo shirts and popping all the collars, maybe donating [Tacony 00:01:28] 2012 or dating that one person that one time. You know the one we’re always going to get things wrong. That’s just life, but there are also things we can get right on the first try like shopping for life insurance.

Mindy:
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Mindy:
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Mindy:
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Mindy:
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Mindy:
Okay. Welcome to BiggerPockets Money episode 117. We are recording this on Friday, March 20th, 2020 right before it’s released on Monday, so any revelations that came out over the weekend happened after we finished recording. We are trying to keep up to date as possible, but we also need to give our fabulous editing team some time to work their magic. Last week we spoke to JL Collins about the state of the stock market and in that episode, he recommended staying the course and not selling your stocks. I sent him an email earlier today and got a response from him that he is still recommending this course of non-action.

Mindy:
Today, Scott and I are going guest less. We are answering the questions that you are asking us. We asked in our Facebook group what topics do you want to hear about? If you are not part of our Facebook group, you can join by going to facebook.com/groups/bp money.

Mindy:
In the beginning of the responses that we got, Chrissy responded “As much as I would like to be in a position to buy great deals, I have realized the importance of reserves. I’m going back to basics of paying down debt and having reserves for my current properties instead of stretching myself thinner.” And I want to kiss her, except I can’t because we’ve got Coronavirus and plus I don’t know where she is. I’m self quarantining as well. This is so strong. This is so smart and I’m going back to basics of paying down debt and having reserves for my current properties instead of stretching myself thinner, and I just can’t think of a better course of action for somebody to take if they don’t have massive reserves then that Scott.

Scott:
Yeah. I think that decision is appropriate in any economic environment, not just the fact that we're scared because the Coronavirus and whatever. You should not be investing in real estate without reserves, right. Under really any circumstances, right. One exception that you might make is if someone is very young and getting started out and it's going to delay their purchase of a house hack by months or years to build up those reserves.

Scott:
The only reason I would say that is because that’s what I did. I had $20,000, I brought $12,000 down to my property and I might’ve dwindled my reserve to about $5,000 at its low point in the immediate aftermath following that property. And that’s a risky position. But it’s a risk I took because I thought it would help me build wealth that much faster and sooner. But there’s really no circumstance. We should have no reserves when you’re getting into this business and you should be extremely uncomfortable if you do decide to take a calculated risk and not aggressively expand your portfolio until you have built that reserve position. So kudos to Christie and I certainly encourage everyone regardless of the market to invest from that position of strength.

Mindy:
Yeah, I just can't say anything better to top that. I'm going to bring in Susan now. She said, "You know, it is so tempting and easy to just roll together rental and W2 income, and I'm glad that very early on I set up separate bank accounts for my rentals. Also, I had been letting the money there accrue and I just hit $20,000 which I had determined to be a good number for reserves. I now have an even greater appreciation for the value of having an adequate reserve." Then she says something really, really important, "You can estimate future repairs and CapEx all day, but a pandemic, where was that on the BP calculators?" So developers who are listening. We need to add that in. I'm not sure what sort of reserve percentage we should add for Coronavirus pandemic preparations. But she's right, you can estimate all day long, but emergency funds are for emergencies and I think a pandemic qualifies.

Scott:
Absolutely. The point of the reserve is to handle large CapEx or other operating issues in your business that you can't predict, right. You can't predict when the roof's going to go out and you're going to need to finance that repair and that could coincide with a credit crunch, right. Which is exactly what we're experiencing right now. It may be very hard to go out and get financing for that new roof or even find that a contractor to do it right now, right. And so your reserve is for exactly this moment in time. And I think that's the whole point of it. And then the BiggerPockets calculator, right. It's just a calculator. You put numbers into it, but luckily it encourages a lot of people to put in relatively conservative assumptions around their cash flow. And then, of course, the reserve is there to be even more conservative than those conservative cash flow assumptions you put in around the longterm. So great point, Susan.

Mindy:
Yeah, and not every property makes a good rental. Not every property makes a good investment of any kind. So running them through the calculator with super conservative estimates is really the best way to, let’s see, I don’t want to ensure future success. What’s the right word I’m looking for, Scott?

Scott:
I would say to be fair none of us have really advocated putting in too conservative of assumptions into rental property and there’s a reality you have to make there, right. If you’re underwriting so conservatively that you’re accounting for apocalypse, right. Then you’re going to be priced out of deals in most markets, and that’s not a reasonable way to approach life either, right. But you do put in higher vacancy than you think will be the reality. Current circumstances, you put in a higher CapEx and maintenance allocation, than might be the reality, and you run your numbers based on that. There’s no way to possibly account for, Hey, the government might shut down evictions and you might not get rent at all for a very long period of time, and by the way, that is a theme question that we do address here at some point, Mindy, I don’t know if you want to do that next or downstream here, but that’s, that’s a big one on investor’s minds.

Mindy:
We’re going to tease you with that answer. We’re going to answer a different question first because I thought that it would go in more of a flow. Another big, big question in that Facebook group is, “Should I buy this property? I am under contract and I’m not sure if I should go through with it or cancel.” And I think this is a great question and three weeks ago the answer would have been very different than today, but today is where we’re talking.

Mindy:
Another person asked, “Does it make a difference if it’s a primary residence?” So a few things you should consider in this, “Should I buy this property if I’m under contract?”, right back up to the reserves? What are your reserves look like? If you’re using absolutely every cent you have to buy this property? Nope, you should not go through with it, you should cancel.

Scott:
You shouldn’t have been buying the property in the first place.

Mindy:
You should not have been buying the property in the first place, but you should definitely cancel the contract now. Even if you're going to lose your earnest money, even if it's going to be a financial hardship for you to lose your earnest money. And frankly, especially if it's going to be a financial hardship for you to lose your earnest money. What's your earnest money, $2000, $5000, $10000? If you can't afford to lose that, what are you going to do when your tenants don't pay rent? How are you going to pay your mortgage when your tenants don't pay rent? And yes, there's eviction, moratoriums and foreclosure moratoriums but you are not putting yourself in a good financial position by buying a property you can't afford and digging yourself into a deeper debt hole. If you haven't already bought that property and you can't afford it, you should not be buying it now.

Scott:
Yeah. So if you’re not well-capitalized, you shouldn’t be buying property good, bad, in different times. If you are well-capitalized and you do have reserves then you’ve got a reasonable question here and a lot of new investors I think are pretty scared about entering the real estate market right now. And I think that’s a fair point. And I didn’t know the answer to this question, and so I crowdsourced it, I posted it to the BiggerPockets forums, and there’s a lot of good discussion around there. And some of the more popular responses revolve around this theme of, Hey, this can be a time of buying opportunity for a lot of folks who have a really good lockdown philosophical approach who are doing this for the long term and are well-capitalized. If that’s you, you may go full steam ahead.

Scott:
But the reality of the situation I think for most, aside from that small minority, is that if you're a newer investor buying your first or second, maybe even third property, that you're pretty scared right now and there's a lot of uncertainty in the market. And I think that's just going to limit the interest in general from a good number of newer investors. And that's okay. I don't think there's anything wrong with that. You got to be investing in this when you feel that it's a good move for your personal situation. And, so I bet you that in reality a lot of people are going to pause on their property searches, submit fewer offers and general a little bit less activities, especially from the newer folks buying their first home or first property.

Scott:
And I think that’s just the reality you have to acknowledge in there. Whether we advise not to go forward or not I’m going to continue looking at properties and continue with my long term real estate investing approach. And I wonder if I’ll have a little bit more opportunity to find some cash flow or better appreciation long term prospects and less competition from other buyers in the near future while there’s a lot of uncertainty. But I think that’s kind of the decision that you’re going to have to make personally.

Scott:
And then to address the other part of this point, if I’m already under contract, should I go through with it or cancel, right? Well again, that comes down to the earnest money thing. Most contracts or many contracts do not have an Act of God clause in there that would account for circumstances like the Coronavirus. Many contracts currently going in are adapting rapidly. A lot of agents and lawyers have adapted rapidly. And David Green had a great point on the BiggerPockets Real Estate podcast released this last Thursday, I think it’s episode 374 about how agents in his town already have a clause in there that is extending the close period from 30 to 60 days. Making it contingent on certain financing things, ensuring that the appraisal comes in because the appraisal can certainly change over 60 days if market conditions do worsen and so you can account for that uncertainty as you’re going into contract. But if you’re under contract, you need to abide by that contract or else risk forfeiting that earnest money.

Mindy:
Yes, but just because you’re forfeiting earnest money doesn’t mean that’s not the right choice for you. Take a look at your financial situation and your financial outlook. What does your job look like? I have a pretty secure job, I’d like to think, right Scott?

Scott:
I believe so, yes. Please don’t leave us, Mindy.

Mindy:
I have a fairly secure job, but there are a lot of people who don’t. So be honest with your own job prospects. Are you in a town that’s drying up? Are you in an area of the world where there’s not a lot of job prospects? Who are your tenants going to be? Are you renting to students? There’s a lot of factors that play into things and just because you can get good financing and your W2 job can cover the amount of your mortgage if you’re renting to students, and they’re going to close colleges for the next semester, maybe this isn’t the best time to buy. So there’s a lot of things that are going into play.

Mindy:
You know what Scott, I think I’m going to write an article about this. Yeah, I will write an article about this. I will post it on the BiggerPockets blog and I will link to the show notes here once it comes out. And these show notes can be found at biggerpockets.com/moneyshow117. Does it make a difference if it’s a personal residence? I think again it goes back to what are your job prospects? What does the market look like? What did your real estate market look like the last 3 to 52 weeks? In the last year, what did your real estate market look like? We’re in Colorado, we’ve got a pretty hot market. There’s low inventory from 2008 when everybody stopped building. We had a massive influx for a while and I think we’re now more of a balanced state, but there’s a lot of demand for real estate in our part of Colorado, and I think that will continue once the virus burns itself out. Is that the right phrase?

Scott:
Once things blow over maybe, yeah.

Mindy:
Once things blow over. Yes. I think you need to look at a lot of different things. Oh my goodness. Should I cancel my contract? Well take into account a lot of different factors, but yeah, you asked the question, “What do I do if I already have properties and my tenants can’t pay rent?” We are actually going to throw this over to Brandon Turner because on episode 374 of the BiggerPockets Real Estate Investing podcast, he answered this like the pro that he is. So Brandon take it away.

Brandon:
The government may step in at some point. I mean if the government’s going to make it so that tenants don’t have to pay rent, my hope is that they’ll step up and somehow help with the mortgage thing as well. Not just for landlords, but for every homeowner in America. 20% of them who may be out of work. What’s the quote like 40% of Americans don’t have $400 in their checking account or something like that, or couldn’t survive one paycheck. We are going to see that in two weeks. All of us who are landlords are going to see in two weeks from now, we will have tenants who are not working at this very moment right now and will not have rent two weeks from now.

Brandon:
So I think the most important thing, and I’ll go to you as well Jay, I think the most important thing is to have a plan. If you’re shooting by the seat of your pants when a tenant calls you and says, “Oh I don’t have rent money,” and then you’re trying to decide then what to do, that’s always a scary position to be in.

Brandon:
So my wife and I have been texting back and forth all day today and yesterday and in talking obviously, but what is exactly our plan? If this happens then this, if this then this. So for example, we are going to first of all tell tenants rent is still due. That's our first. We're going to say rent is still due. Second, then we're going to say if they just literally can't do it, who can you borrow it from? Third, here's some government aid. We're researching right now government assistance programs in our various counties. Do some research that is your job landlord. Do some research. Find out what the government programs are helping your tenants if there are any. And then four that we really, really can't. There's no government, there's no family help. We've really exhausted it. Then, yeah we're going to work with our tenants, and we have a plan in place for that.

Brandon:
One thing I don’t want to do with my tenants is say, Hey, let’s just postpone your rent for a month and you can just pay two rents next time. That never works for tenants, right. If you let a tenant get behind, they will never get caught up. I’ve never seen it happen. I should say a low-income tenant because it’s not like they’re suddenly going to have more money in two months from now. So what we’re going to do is structure payment plans, which I generally never do and I’ve always advised against payment plans, but in this case, we’re going to do that. Hey, we’ll spread out your payment over a 12 month period. And so your rent goes from 600 a month to 700 a month after this is over, but you can take two months off or whatever. So that’s my advice. Is have a plan in place for what you’re going to do because it’s coming.

Scott:
Yeah, so I think Brandon absolutely nailed that when we were recording that episode of the podcast, which is why I asked them to kind of put that back in here as well. I don’t think I can answer it any better. But one thing I do want to address here is this worry I think that is seeping through the investor community, the landlord community, about is there a future on the horizon where HUD suspends evictions or evictions are suspended in your area. Tenants don’t pay rent, and yet landlords are still on the hook for mortgage payments, right.

Scott:
And that’s, I think, the apocalyptic scenario for a lot of people. If that happens, landlords are just going to bleed again and again and again and again and again until even those of us who are very well capitalized eventually run out, right. That’s the doomsday scenario that I think everyone’s afraid of. And I get that’s a fear. Maybe I’ll look like a fool in three to six months. I just can’t see that reality coming to pass in that doomsday scenario. I certainly see some tenants here and there acting poorly. We’re already seeing a couple of horror stories in the forums. There’s one particularly bad story about a tenant that seems to be taking advantage of a landlord that’s featured on our forums right now, and certainly-

Scott:
Of a landlord that’s featured on our forums right now. And certainly, some landlords are going to have experiences with tenants who take advantage of the situation, don’t pay rents, and that can’t be evicted for behavioral issues, those types of things. But I really feel, in a more likely scenario, is that if evictions and rental payments stop for whatever reason, that there will be a similar deferment on mortgages, mortgage payments, those types of fixed overhead that would really cripple landlords in those types of scenarios. So, personally, we got to watch and see and wait, but really, I think that there’s a much higher probability of a reality coming to pass where either things are fairly normal or everybody is out of those fixed payments for a period of time, which obviously disrupts landlords’ passive income but doesn’t require them to pay the mortgage and not receive rent for a prolonged period of time.

Scott:
So I get that, that’s a doomsday scenario, but I wonder if that’s really a likely possibility going forward that would kind of do some serious existential damage to the real estate economy and change the game for the worst for the long-term for a lot of people. You’re not going to rent to certain types of tenants anymore if that happens and I think there’s going to be a lot of problems that the government will have to figure out in the aftermath of a situation like that. So again, you can’t predict the future, but I really think that, that’s a fear that we can kind of put it in the pocket as a very low probability outcome.

Mindy:
Yeah. If you look at the government itself, the members of Congress, even the president, these are people who invest in real estate. They understand the real estate investor mind. I would think at least a majority or enough of them would bring it to the attention that they wouldn’t do one without the other. Again, Scott and I could look completely foolish for saying this, but I don’t think so.

Scott:
Yeah, but certainly hear that as a major fear right now and I can’t blame people for worrying about that. All right. What’s the next question, Mindy?

Mindy:
Okay. People want to know how they can take advantage of the current situation. Stocks have fallen, what is it? 25% to 35%-ish, depending on, I mean, I don’t know what it closed at today, but if you have extra cash laying around and a reserve fund, you may be able to take advantage of these low, low prices. The stocks are on sale. Everybody’s saying that, but what do you think Scott? How do does somebody take advantage of this without being too fearful?

Scott:
Look, I think if you’ve been listening to the BiggerPockets Money Podcast or been in the fire community for a long time, right, you’ve probably been spending less than you earn, you’ve probably paid off a lot of your bad debt, you’ve probably built up an emergency reserve, you’ve probably been investing, right? So if you’re someone who has assets, right, for example, I lost $100,000 in the last, what, 30 days, right? That’s a good problem. I’m privileged to be in that position of losing $100,000 in the market, right? That’s because I’m well-off and well-capitalized, right? So, when you think about who’s going to get hurt in this economy, right, the person getting hurt the worst is your hourly restaurant or service or retail sector employee, right, who’s not having any income and maybe, maybe that person still has rent due, and if they don’t pay rent, maybe they can’t get evicted, but they still got to pay the utility bill. They still got to buy food, right? Those types of things, right?

Scott:
Most of our listeners, not everybody, but many of our listeners still have retaining jobs. They’re able to work remote or from home, right? So if you’re in that position and you’re still able to earn an income or even just as much or very close to amount of income you were earning before all this happened and maintain that, you have a reserve, you have investments, I think you’re going to be in a position of relative strength going through this. I think you’re going to be able to continue to save, take advantage of economic opportunities, and find yourself in a really strong position on the other side of it. So I think that basically, everyone who’s part of the fire community has been naturally preparing reasonably aggressively for this type of circumstance and is going to find a lot of opportunity in different areas as they fight to maintain their… because everyone’s fighting for whatever jobs become available, there’s going to be subsidies from the government.

Scott:
It looks like they’re getting closer and closer to passing a bill where every American’s going to get $1,000, every child is going to get $500, or the families are going to get $500 per child, those are not discriminating based on income, right? Government, as part of that package, the most recent one, we’ll see if this one passes, as part of that, there’s a $300 billion stimulus package to help companies make payroll, right? So if you’re earning an income, you may get both a government subsidy and cash and the government may subsidize your business, your employer to help pay that stuff. So, who’s going to come out of this advantage? It’s the conservative person who works hard, has the highest probability of keeping their job and continuing along with those things. And, look, everybody else is even worse off and the government’s going to have to address that at some point. So, I wonder if there’s going to be a lot of investing opportunities and career opportunities for those who do put in the work, the hustle, are well-capitalized, have good credit and maintain that position throughout this.

Mindy:
I have nothing to add. I’m going to pull a Charlie Munger here and say, “I have nothing to add.”

Scott:
Fair enough.

Mindy:
No, I know that you have done more research on that than I have and that’s, I mean, I can’t disagree with you. I really can’t see how… you don’t want to talk government bailouts, you don’t want to be reliant on that, but I can’t see how something this big can’t be addressed very swiftly. Okay. If you are still in the process of paying off debt, do you pay the debt or buy more market shares? And I think this kind of goes back to, you’ve sort of already answered this.

Scott:
Well, I actually do have some thoughts on that, but do you want to chime in first?

Mindy:
Yeah. I actually would throw in a third option. Do you pay off the debt, do you buy more market shares or do you stop making payments on the debt currently? And frankly, I would, again, it all depends on your circumstances, but if it’s a significant amount of debt, if you’re not going to be paying enough anytime soon, if you’ve got maybe some uncertainty in your job, I certainly wouldn’t be buying more market shares right now. I would be maybe even holding off on paying off the debt. If it’s only those two options, continuing paying off the debt or buy more market shares, again, how much debt do you have? What’s your income? What does your job prospects look like, and maybe 50-50 it, pay off the debt, pay down some debt and buy more market shares. I mean, these market shares are, they were at, three weeks ago, they were valuable to me. They’re even more valuable now because they’re priced lower.

Mindy:
I wish I had more money to throw at them. I have a real estate closing at the end of the month, I’m hoping to throw all of that into the market, but I also don’t have any debt.

Scott:
Yeah. Here’s how I think about debt in general. If I have debt finance and interest rate of zero to 4%, right? I’m a reasonably ambitious investor and I believe that long-term, investing in most of the alternatives that I would conceive of investing in is going to generate me a risk adjusted return that is much higher than 4%. so I do not make prepayments or aggressively paid out anything beyond the minimum required payment on debts financed at zero to 4%. If I have a debt financed that has an interest rate at seven or more percent, right, that’s a very high interest rate, and if I pay down that debt, I’m getting a very high guaranteed return, right? And so I would pay down that debt right away if I had that kind of debt at that level. I’d also pay down any bad debts that were coming in at those types of rates. Go ahead, Mindy.

Mindy:
Can you explain how you’re getting a good, a guaranteed return? Because that phrase may be confusing.

Scott:
The interest rate on my debt, I know that I'm accruing interest at a rate of seven or more… let's say interest rate at 10%, right? $100,000 at 10%. I know I'm accruing $10,000 a year in interest on that loan, right? So if I pay down that loan, I'm generating a $10,000 a year profit or I'm avoiding having the payment of $10,000 in interest, so I'm getting a 10% return for every dollar of principal I pay down [inaudible 00:28:40]I pay it down. Right?

Mindy:
Okay.

Scott:
So that’s how I think about that. And that’s a truth that we’ve all held to be true, I guess, or stable at any market condition except for the possibility of today, where there’s talk about the extraordinary measure of potentially deferring payments. I don’t think it’s wise to plan on that, that may happen though, and that may be the first time in history where you don’t have these interest payments come due and you’re not accruing the debt, but effectively, your interest rate is dropping dramatically if we do in fact begin allowing people to defer payments, right, and not accrue interest. Now all that’s up in the air and stuff that’s going to evolve, maybe even over the coming days between now and the release of this podcast, we’re releasing Friday, we’ll launch Monday. But anyways, so if I’ve got seven or more percent interest, I’m paying it down. If I’ve got zero to 4% interest, I’m not paying it down aggressively.

Scott:
If I’m in that bubble, five, six, four and a half, five, six-ish, maybe even that seven range, these are all gray areas that are kind of exhibiting between these three interest rate zones, if you will, right? That’s where you have a hard decision. There’s no right answer there. Should I pay off that debt early or should I invest? Maybe, maybe the market dropping recently shifts in the minds for some people that have that four, five, 6% interest rate debt to maybe make the minimum payments on that debt begin investing or stockpiling cash instead, because those might give a higher risk adjusted return in their minds. But that’s I think the way the dynamics should be thought about for people thinking about whether they should continue paying down their debt or invest in alternative assets.

Mindy:
Okay. Let’s go back to real estate for a little bit because we are BiggerPockets Money but BiggerPockets, what about short-term rentals? Airbnb came out and said, “Because of this unprecedented situation, we are going to allow anybody to cancel their reservation,” and I can’t remember the exact dates, but if it was made, the reservation was made up to March 13th or 14th, they were allowing you to cancel regardless of the host’s cancellation policy, and I completely get where they’re coming from. I can see the side… I have an Airbnb rental reservation that I’m… it’s in June. What am I going to do about it? I don’t know. I’m just holding off right now. But there are people who are traveling this weekend. They canceled, they got all their money back. The hosts are left holding the bag, and this is extremely unfortunate for the hosts. And I wish that Airbnb would have handled it a little differently. I wish that they would have given a heads up to the hosts. I don’t think they have any other option than to allow guests to cancel with a full refund.

Mindy:
I mean, I can’t think of another… they’ll go out of business if they don’t have guests, they’ll go out of business if they don’t have hosts. It seems like the hosts are bearing the brunt of this policy.

Scott:
I canceled a trip too. I was going to go to Grand Cayman for a vacation with Virginia, right? And we canceled and I split the booking fee with the host, this is before Airbnb announced their policy. I thought that was the appropriate way to handle things, frankly, right? It’s an unfortunate, I got to cancel my trip. I didn’t want to cancel my trip, and the host doesn’t get that revenue anymore, right? And they still got to pay their mortgage. So I thought it was appropriate to split that between the two and that’s what I’d do if I were king for a day. But Airbnb has gone a different route, of course, which Airbnb hosts have to cope with. And if you are in the short-term rental game, right, I’m not in the short-term rental game. If I was going to get in the short-term rental game, and I’ve been saying this for years, I underwrite the property to long-term rents and make sure that I can profit if I’m going to make long-term rents. I do not underwrite depending on the short-term Airbnb income, right?

Scott:
The Airbnb income is a nice boost to an already profitable investment, not the dependency. And the reason for that was not because I predicted a coronavirus induced recession, but because the law is not on your side in most jurisdictions around Airbnb income, right? In Denver, you can’t rent out your properties in Airbnb. A lot of people do. They buy up a house, they build an ADU and they rent that out because that’s in compliance with the law. But the trend of the law is to move away from that. Homeowners and neighborhoods do not like Airbnb tenants. They’re noisy. They’re problematic. Right? And the trend of the law in many jurisdictions has been to make it harder and harder for hosts to profit from Airbnb. And you know this as a short-term host. And so what should be happening here is you should have a backup plan and when you don’t… you get more cashflow from Airbnb than you do traditional rent, that’s why you do it. If you didn’t do it, you have a tenant that you didn’t have to clean up after every weekend, right?

Scott:
And you also know that this business is seasonal, right? So then Airbnb operators should have an even bigger reserve than a rental property operator to account for the fluctuations and seasonality of their business, and then of course, be ready to revert that property back to a long-term rental if needed. So I think those are the ways to think about the Airbnb environment.

Mindy:
I completely agree. The laws are so ever-changing. Episode 364 of the BiggerPockets Real Estate Investing Podcast featured Avery Carl, and she is a short-term rental expert. She lives and works, invests in the Smoky Mountains, the Gatlinburg, Tennessee area where, and one of the best, that was a really great episode. If you’re listening, if you’re thinking about getting into short-term rentals, if you are in short-term rentals, you need to listen to that episode, she has a lot of great tips. But one of the tips she has for people who are looking to get into it is go where they already have the laws. Gatlinburg is a tourist town. There’s nine regular residents and 50 million touristy residents that come in and they have their laws ironed out. They’re not going to change their Airbnb laws because those laws are beneficial to the city, to the neighborhoods, and everybody just understands that.

Mindy:
So when you’re in a big city like this, they’re kind of changing rather quickly. And I completely agree, you need to underwrite the potential property as a long-term rental. Now that’s not super helpful to somebody who jumped in and then lost all their income. Like Scott said, you need to have an even larger reserve for when you’re doing these short-term, riskier rentals.

Scott:
Yeah. I think that the tough thing here is I don’t know what the answer is for somebody who just bought a property with no reserves, that cashflow is at $100 a month, but doesn’t really cash flow because they didn’t take into account for vacancy and CapEx and maintenance. I don’t have the answer for somebody who’s got an Airbnb that can’t rent it out to a long-term tenant and has all their income dried up and still has a mortgage payment and has little reserves, right? There is no good answer to that. The answer to that is you listen to the BiggerPockets Money Podcast, you spend less than you earn, you build a financial foundation that’s capable of investing in these items from a position of financial strength and you invest in a sustainable long-term strategy, right?

Scott:
And the vast, vast majority of listeners and people who’ve reached out are doing exactly that. If you’re finding yourself in over your skis and about to lose a lot of income and don’t have the reserves to do it, then you need to do whatever you possibly can right now. Start working overtime, start finding a side hustle, deliver food for Uber Eats, whatever it is, and build up your position, stop your expenses and understand that you are screwed if you are not well-capitalized right now. Because this is the reality that we plan for as long-term investors. We know we’re going to hit a recessionary environment or a drop in stock market prices or whatever every couple of years. The only thing unusual about the last 10 years is that it was 10 years, 12 years between the last big drop and today.

Mindy:
I kind of do have an answer, Scott, and it might not be the answer that people want to hear, but if you are, to use your term, in over your skis and there’s no good prospects out there, you don’t have a reserve fund, you don’t have tenants, you don’t have the ability to start generating income with this property, maybe you need to put it right back on the market, maybe you need to bite the bullet and lose the real estate commission that you would have otherwise not paid and just get it sold, get it out of your debt collecting side of your balance sheet. What’s that called? The negatives on your balance sheet. If you didn’t buy from a good position, maybe right now isn’t the best time to be holding real estate. And I love real estate. I work at BiggerPockets, I talk about real estate all day long. It hurts me to suggest that you sell your property, but this is a different time than it was even two weeks ago maybe when you bought it.

Mindy:
And that leads me to the next question. I closed on a rental property on February 29th. I got a great deal and rate. I found a tenant before closing, but I didn't sign a lease contract. The property needs repairs. If no virus, I would have had the property ready and rented by April 1 but now, all of my vendors have canceled. I have no suppliers for materials. I listed it for rent in case I can rent it as is. How do I mitigate the losses? I'm going to say rent it as is. I mean, I'm assuming that it's habitable. If it's not habitable, you can't rent it. That's the end of that.

Scott:
Yeah. I actually had a direct discussion with this individual about this in writing the other day, and there are some really good… this is a really good point. This person was well-capitalized and was investing from position of strength and is now trying to find a way to mitigate their losses there, right? And there’s a couple of different ways to think about this. If you try to keep dropping the rents for a long-term lease, then you risk going too low and getting less rent than market over a 12-month period. Right? If you try to keep the rents at the same high price, that you originally thought you could get a few weeks ago, in the short-term you may get no rent, right? So there’s a couple of creative solutions that might apply to this situation and the only issue is that we’re inventors here rather than followers. It is never good to be an inventor in this type of scenario.

Scott:
But a couple of those solutions are, one, go to month to month, go to lower rate, month to month, have an intro low rate and then say, “Hey, I plan to raise the market rent from here to here over time, but this will be a lower risk way for you for the next two or three months, and then we can raise the rent and agree to a longer term lease over time as we see what market rent settle back into.” That’s a really, I think, creative way to offset some of that risk in the short-term for this fellow while also giving him a chance to get a fair market rent at the end of the day. Good deal for the tenant in the short run as well. So I think that was… I guess that was the kind of solution that we settled on in that discussion. I think that was an interesting approach and really good on him to think of that.

Mindy:
Yes. And this was actually, I think, I think you were having a…

Mindy:
Yes, and this was actually… I think you were having a conversation with the guy who responded, but this was actually a woman who had asked that question, and then another guy said, “I have a similar spot, but I’m in a similar spot.”

Scott:
Mindy, I got almost the exact same question for somebody else then.

Mindy:
Well, it’s not a unique position to be in. Right now is the very start of the spring selling market. It’s, what is it, March 20th when we’re recording this. March is the beginning of the spring selling market. Maybe you went under contract in January or February. You just closed and then the market fell out from underneath you. Again, it goes back to the very beginning. You need to have good reserves. What do you do if you don’t have good reserves?

Mindy:
Can you get some reserves? I mean, having a little bit of income and a month to month tenancy can be really beneficial to both of you because the tenant isn’t locked in. What if they lose their job? They can cancel the contract and go live with their mom.

Scott:
Well, let me tell you this in the reserves front, suppose I got a property that’s worth 300,000. and I got a mortgage of 200. I would rather have a mortgage right now of 230. I’d rather refinance, pull $30,000 in cash out, and have that sitting in the bank than have no cash in the bank and have a $200,000 mortgage. If you’re taking out a little bit more debt to have a little bit more reserves right now, that’s something that Jay Scott recommends and that I agree with and recession proof of your portfolio.

Scott:
Much better to have liquidity even if that comes at the cost of a little bit of increase in your debt than to be without liquidity and have less debt, I think.

Mindy:
Yep. I agree.

Scott:
That’s just general in every market condition. You pay the cost of that of holding cash every moment in a growth market, and you don’t get the benefit of the return on that reserve until today or until the recessionary environment if we do go into recession, although it seems ever more increasingly likely that we are here, and that that’s the environment we had to adapt to.

Mindy:
I don’t think it makes much sense to ignore the big R word. We are definitely going into a bit of a recession, if not a longer term recession. We had Jay Scott on episode 70, where he talked about his recession proof investing book. This is an ebook that’s available at biggerpockets.com/store. It is a book that gives you tips for maximizing your investments during a recession.

Scott:
All right, hope you’re enjoying the show. We’ll be right back after a word from today’s show sponsor.

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Mindy:
Another question that we had was how about doing a financial reset episode? Everyone is getting hit. In this time of crisis, it would be good to take a step back and evaluate.

Scott:
I love it. When I think about a financial reset, I think the exact same things you do to go all out in pursuit of financial independence are exactly the same things you should be doing in the times of a recession to prepare and have as little stress as possible. When I think about a financial reset, I think, “Great, very first step is I’m going to track my spending.” The next thing I’m going to do is I’m going to think about, “Hey, most people have the big three expenses. Where’s my money going, and what are the biggest items in my budget?”

Scott:
For most people, that’s going to be housing, transportation, and food. Then how do I begin immediately reducing my household spending, because spending is what’s going to kill you in the times where you dry up with your income or have other problems, right? The less you spend, the more cash you can accumulate, and the less cash you need, the less liquidity you need on a month to month basis to maintain your financial position. If I spend $2,000 a month, I need $25,000 in the bank just to stay in my lifestyle for a year.

Scott:
If I spend $5,000 a month, I need $60,000 to sustain my position for a year. Both increases my savings rate and increases the financial runway I like to call it that a dollar has for you. The first step is you track your spending and you think about this big three expenses. Obviously, you can’t change your lease or your car payment right away. Those are difficult things to maneuver, but you can take control of your food situation right now, and this is a perfect time to reassess what you eat, how you eat, right?

Scott:
You go to the grocery store. There is nothing left except the healthy food. It’s remarkable. I went there the other day, and I was like, “Only the things I want to buy are for sale.” It was amazing. There’s no white rice. Great. Now, you can buy the quinoa. I don’t love quinoa. I actually hate quinoa, but you can buy Brown rice or whatever, steel cut oats, plenty of steel cut oats. No Oreos. No Oreos for sale. This is a great time to do a hard food resets on your budget. Buy healthy food from the grocery store and make it yourself at home.

Scott:
You’re already at home. Get that habit in place. There will never be a better time. Do not allow yourself to fall into a terrible habit of snacking all day at home, which I know some people are already falling into. Do you not allow that to happen? Do healthy food.

Mindy:
Oh my God. Don’t let your kids do it either. My kids, every morning… They’ve been off school for a week. Every morning, they get up and they’re like, “Mom, I’m starving.” You’re not starving. You’re bored. Go for a walk. Go outside. Go play in the backyard. Go do something. If you are quarantining yourself, maybe that something is going for a walk by yourself. Maybe that something is going for a bike ride by yourself. Maybe you just had a blizzard like we did yesterday on the very first day of spring.

Scott:
You can shovel the snow by yourself.

Mindy:
Shovel the snow. Shovel your neighbor’s snow. Come shovel my snow. Shovel the street. They don’t plow here in Colorado. There are lots of things you can be doing that don’t require you to be eating to do it, that don’t require you to be in a crowd doing it, and still get your mind off of whatever it is you’re doing. I mean, it’s so easy to just eat mindlessly. I’m sitting here. During this recording, I’m having my lunch too, but it’s so easy to eat mindlessly. It’s so easy to just grab one thing or just grab two things. Don’t.

Scott:
There’s other lots of grocery stores, so I got carrots and hummus. That’s what I’ve been snacking on today. Anyways, so you got your food. Next step’s going to be the car payment. Now, you’re naturally probably not going to buy a new car this year. It’s time to either sell the car. Think about selling it. Don’t take out a new debt to buy or finance a new car for sure, because your car is… If you have a new car right now, it is sitting there. You’re paying financing on it, and it is depreciating in value very rapidly.

Scott:
You don’t even get to use it to commute to work anymore because you’re probably in social distancing and working from home. It’s just another example of why that transportation expense can eat you alive, and there is no reason to do anything else than get a cheap economy car or a safe family vehicle if you do have a family and want to prioritize that. There’s a lot of safe, affordable options out there. Then the third thing is housing. There’s not much you can do about housing in the next month or two, but over time, the economy has to open up somewhat.

Scott:
We can’t just sit in our homes indefinitely without making any changes. When that comes, your choice is do you renew your lease or do you buy a new big fancy house, or do you buy something that’s well within your means? When you have control of those big three expenses, when you’re tracking your spending, when you’re just adopting naturally frugal outcomes that prioritize your financial wellbeing in the context of your happiness, I think you’ll find that your happiness is not going to change whatsoever, but a magical thing is going to occur in your bank account where you’re going to start accumulating a much larger surplus.

Scott:
You’ve heard this a million times, the BiggerPockets Money podcast. How many guests have said the same things that we’re just talking about right now?

Mindy:
100% of them.

Scott:
100% of them. You’re going to start accumulating a surplus. What you do with that surplus then, that’s where the decision making becomes a little bit more tricky. We talked about how to think about your debt payment earlier in this episode, but it’s maintained your credit. Build up a reserve that’s appropriate. Pay off your bad debts, and then build up that financial runway, and then invest appropriately for the long term from position of financial strength. That’s I think what he means by a financial reset.

Scott:
Don’t allow your financial reset to be, “I’m going to do a lot of shopping on Amazon and a lot of snacking on Oreos as I stock up on a massive amount of junk food from the grocery store.” Make your reset one that is really healthy overall, gets you into new habits in your new housing, in your housing and lifestyle situation that you’re adapting to, and scale it from there.

Mindy:
I’m going to add to that just a little bit, Scott. You were talking about having a lease. You didn’t talk about somebody who has a house already. If you have extra space in your house and you have low cashflow, consider renting out a room to somebody that you know, somebody that…

Scott:
Yes.

Mindy:
There’s a lot of people out there who are not able to make their huge rent payment. Maybe they can make half of their rent payment. You could rent out a room in your house and generate a little bit of income and help out a friend.

Scott:
House sak.

Mindy:
House sak.

Scott:
That’s right.

Mindy:
Oh yeah. Hey, do we have a book about that, Scott?

Scott:
We do indeed, but this is the time to dig up all those posts from Mr. Money Mustache. I know he's been less active than usual in the last year or two, but the godfather of financial independence. I don't know if that's too high and mighty title for him, but really, this is a good time to dig out his blog and go back to that. A lot of people in the boom I think have been moving away. Yes.

Mindy:
My husband is reading The Godfather right now. That’s funny that you said that.

Scott:
Mr. Money Mustache wrote about all of this eight years ago. I took my blog the other day. That was from 2012. It was the 4% rule, the easy answer to how much you need for early retirement. Recently, I’ve seen some stuff saying, “Oh, I used to be Phi. I’m no longer Phi because I had 25 times my spending and could spend in the 4% rule.” It’s like, “No, dude, the 4% rule, the reason you built up to 25 times your spending was because the 4% rule takes into account exactly what is happening today with the market circumstances.”

Scott:
You start with 25 times your spending, and the market plunges 30%. Well, that’s why you did the 4% rule and not the 7% rule. You’re still Phi, right?” If you retired in February 29th, 2020 with 25 times your spending, and the market just tanked 30%, the 4% will take that scenario into account. That’s the most… That’s what it is.

Mindy:
Yes. I want to invite people to read the 4% rule article that was in life magazine from… It's about William Bengen and how he took all of the different markets and all the different scenarios into account to come up with the 4% rule. He didn't think to himself, "You know what? I'm going to call it the 4% rule. Now, let me go figure out how to make that a reality." He did all the math and he said, "You know what? If you take 4%, and you withdraw 4% and adjust for inflation," and he says it better than I do.

Mindy:
You will have enough money for 30 years at the 96% chance of having enough money still at the end of 30 years, and when you look at his projections, if you take out 3.5%, you have a 100% chance of having money at the end of 30 years. In many cases, you start off with X, and you have 2X or 5X after 30 years, after pulling out the money every single time. It’s an amazingly powerful study. We will link to it in the show notes here. It’s just math doesn’t lie.

Scott:
That doesn’t include cash position.

Mindy:
That doesn’t include a cash position. Remember when we interviewed Christy and Bryce, what is their website? Revolution? Millennial Revolution?

Scott:
Millennial Revolution.

Mindy:
Is that Millennial Revolution? They were episode 55 and episode 55.5, they were our first repeat guests because they so casually mentioned that they were able to test their market for three years or their plan for three years before they put it into play. Anyway, both episodes are fantastic. They talked about not only do we have our financial or our retirement. We also have cash, and I think they have two years of cash.

Mindy:
We also have a yield shield. I can’t really remember what that entailed, but I know it was really good. So listen to the episode, but they had a lot of different options. They didn’t just say, “Well, I know I’m going to need 4%, and that’s all I’m going to do.” There’s a lot of ways to build in extra confidence in your plan, but it all starts with being fairly conservative in your spending.”

Scott:
Love it. Well, there’s another question I want to transition to here, which is how to manage your rentals during these times. We’ve harped on the importance of reserves and writing with conservative numbers for a long time. Let’s talk about some practical things that a landlord can do in these times. What do you think?

Mindy:
Well, step number one is to get a really good tenant. When you rent to somebody who has a very low credit score for reasons outside of crazy medical bills or something like that, if they just have a low credit score, they’re telling you in advance, “I don’t really care about paying about my bills on time.” Don’t rent to people who don’t care about their credit score. Don’t rent to people who don’t care about paying their bills on time. My credit score, I’m super proud of. I have an 800 plus credit score.

Mindy:
I am not going to do anything to jeopardize that. I am going to do everything I can to keep it high. That means I pay my bills on time. That means I paid them off. That means I’m not late. I’m not, what is it, delinquent. I care about it, and I want to keep that going.

Scott:
Yes. I love that. I think tenant screening is a key thing here. The folks with good credit are not going to want to wreck their credit. The folks with bad credit, they're going to be the ones who are going to be the first ones to screw over landlords and take advantage of this no eviction situation, because they didn't care about their credit, and they have bad credit already, but as a landlord, just because they're putting the more trauma in evictions, most people are not going to ruin a lifetime of good credit by stealing money from you and not paying rent.

Scott:
Only the people with the bad credit are going to want to do that, right? You're giving those people a tremendous amount of power. If you're in that situation, you don't have to weather the storm for it temporarily. What are some practical things you can do there? You can consider cash for keys. This is where you pay your tenant their security deposit or straight up cash in order to leave your property so that you can begin the remodeling process and move on. I've used this before. It enables you to get a bad tenant out typically with a reasonably clean unit, and begin work and construction immediately.

Scott:
Go ahead.

Mindy:
I want to say that while I completely understand why somebody would want to do this, I also understand the flip side of somebody saying, “But I don’t want to reward them for their bad behavior.” Look, I can be… Is vindictive really the right word? I do not want to reward you for your bad behavior, and I want to punish you if you mess with me, but when I want to kick out Scott from my unit because he hasn’t been paying me, I can be really nasty about it. Scott could be really nasty back.

Mindy:
He could give me a property that has a lot of damage. He could give me a property that has a significant damage. I’ve seen a lot of these damaged properties, and it just breaks my heart that these landlords are having to deal with this. On the other hand, if I tell Scott, “Look, I know you can’t pay your rent. I’m sorry that you can’t pay your rent. Let me help you get into a new property that has a lower rent maybe or whatever. Let me help you do this. Here’s some money. In exchange for this money, I want you to leave the property in good condition.”

Mindy:
This encourages Scott to not play hammer darts in the kitchen.

Mindy:
This encourages Scott to not play hammer darts in the kitchen. This encourages him not to flush things down the toilet that don’t belong there. And it encourages him not to leave the place filled with animal feces like the people across the street from me the other week.

Scott:
And here’s how I would think about handling a situation with a tenant who wasn’t paying rent and I thought was going to play darts with my kitchen. If I started threatening her, I’d say, “Look, I would potentially go with cash for keys.” Because this is so uncertain, I would want to get them out and begin work finding a new tenant as quickly as possible because I know they’re causing problems and not going to pay me. I’d say, “I’d like to give you $500 and help you move out of the property. And I’ll give you $500 in cash if you are out of this property and it is clean by the end of the week.” Or a thousand or whatever it is that I think is appropriate given the context of rents in my market or whatever.

Scott:
And I’d also say very politely but firmly, “You’re not paying rent. And while I understand there’s a moratorium on evictions, when this is over, I’m going to need to Sue you for that rent and take you to court for that and continue with the eviction process. And that will ruin your credit and may make it very difficult for you to find a place in the future.” So there’s a carrot and stick incentive here too, to kind of show, “Hey, maybe I don’t have power temporarily to follow through on the eviction process right now, but that will change downstream. And this is not playtime and get away without paying rent indefinitely for you. And if you do, then I’m not going to pay you to leave the property. I’m going to bring the full weight of the law down there, wreck your credit, and evict you and sue you for those damages. And take out as many liens I can against you because that’s the law and this is the agreement that you signed.”

Scott:
So it's kind of as tactfully as possible communicating that carrot and stick message, I think is a practical way to go about this. I would also maybe consult your property manager or lawyer before you go and take any specific action. But there's a way, as a businessman, I would begin framing my thought process and trying to work with my tenants.

Scott:
Now the next thing here is let’s say I have a vacancy that we just discussed. We already discussed some of that. Or I’m an Airbnb host and that’s the only way I’m going to make income. Well, now I have to think about things not in the context of how do I attain my numbers that I initially forecast, but how do I get some money?Because every month that you receive no income, you’re paying the whole mortgage.

Scott:
So let’s say your mortgage is $2,000. Well, I’d rather have $800 in revenue to offset that mortgage than $0. So you begin to say, not what was I projecting, but what is the current reality and how do I manage to that? And how do I accept that and [inaudible 01:02:52]my losses and keep things going there? And maybe you have to bring some cash to the table in the interim in order to weather the storm.

Scott:
But the way you lose big from this recession, or if it is recession, is if you lose your property, destroy your credit, and get foreclosed on or can’t hold onto your property. The way you win is by building an effective reputation, maintaining a reasonably well capitalized position, and buying more property at great prices with partnerships, with access to financing. You can’t do that if you have no cash, if you have no credit, and you have no reputation because you’ve lost your property and haven’t been able to manage through this.

Mindy:
You bring up a really good point there, Scott, with partners. Ashley Kehr is the host of the new real estate rookie podcast along with [Felipe Majia 00:03:42]. She was our guest a couple of weeks ago on episode 114. And she built her empire through partnerships. You don’t necessarily have to have money to invest in real estate. You need to have a partner who has money. There needs to be money available to you to successfully invest in real estate. And if you find a really great deal, there are some people out there who have money who would love to partner with you.

Scott:
Yeah, I'll just wrap up here with your real estate investing strategy, in my opinion, needs to win under three market conditions. You've got to be able to win if the market goes up. And the only way you'll win if the market goes up is if you are invested in real estate. If you're not investing in real estate, you don't benefit from rent depreciation or price depreciation. You have to win if the market stays flat for a long period of time. And you win by that because you're paying down your mortgage and your cashflow. That growth is obviously accelerated [inaudible 01:04:38]market. But you win and then you have to win in a downmarket. And how do you win in a downmarket? Well, you have access to cash, good credit, and a great reputation so that you can buy more deals at a better price in the downmarket.

Scott:
And so that’s the approach that your investing philosophy has to be in there. Consistent but not aggressive. And you can’t build a reputation … don’t feel bad if you’re an investor who’s bought property the last couple of years. As you manage through this, I’m not invest …. I’m not giving my money to a newbie to invest as a partner with who has never bought real estate before and is getting started now. I’m going to give my money, if I partner with somebody, to somebody who has properties and is managing them professionally and appropriately and making the best of the situation. And is ready and has a good business plan prepared to go and move forward and buy more at great prices with great cashflow. That’s how you win in all three market conditions.

Mindy:
Yep. And you’re not alone, Scott. There are a lot of people just like you that have the money, they don’t have the time, they don’t have the interest, they don’t have the energy. They want to partner with you. Keeping an eye on the market right now, finding great deals and bringing them to people who have money to partner with is a great way to get into the market. What does Brandon say? 50% of the deal is better than 0% of the deal?

Scott:
Yeah, 50% of a great deal is better than 100% of no deal.

Mindy:
Yes. That’s it. That’s it.

Scott:
I love that quote.

Mindy:
That’s a great quote. Okay, so Brandon touched a little bit on this, how to deal with your current tenants that are not able to pay the rent or not able to pay all of the rent. But I think that you should be a resource to your tenants.

Mindy:
Just because you are the landlord doesn’t mean you have to have a contentious relationship with your tenants, especially if you have a longterm tenant who has been consistently paying you rent. They’re a great tenant otherwise, and they have fallen on hard times. Jacob from iHeartBudgets was a guest on our episode 85. And he compiled a list of resources for those financially affected by the coronavirus. Among them are bank and credit assistance, student loan and mortgage relief, places to pick up lunches for your kids, and even help with utilities and taxes.

Mindy:
He also goes into detail about the family’s first coronavirus Response Act, which was passed on Wednesday, two days ago, which gives guidance on paid sick leave, food assistance and medical testing. And finally at the bottom of his post, he links to many other financial bloggers articles about additional resources, financial hardship, mental wellness, which is something that you really need to be paying attention to right now. Especially when you’re self quarantining. There’s more and more what’s it called? Stay in place. Self quarantine in place. They have a term, I can’t remember what that’s called. But mental wellness is something you should really be considering right now. Money-management, making additional money, and activities for kids when you’re stuck at home.

Mindy:
So we are going to link to it in the show notes, which can be found at biggerpockets.com/moneyshow117. But his website is iHeartbudgets.net/covid19-financial-resources. And it’s a really great list. And he said that he’s going to continue to update it as he gets more information. And as this is a developing story, it’s a fluid conversation, so he’s going to continue to update that as he gets more information. And along those-

Scott:
Yeah it’s a great resource and that will be in the show notes, right?

Mindy:
Yeah, it’ll be in the show notes. In our show notes, but you can also get to it with that link that I just gave. Along those same lines, Frugal Confessions also has a really great article with more than 197 emergency financial assistance resources, both national and by major city. Mrs. Doc, who’s studio has a list of 50 immediate hire work from home jobs. I have not vetted every single one of them, but they look to be pretty legit.

Mindy:
The list is divided into two sections, companies hiring now and companies who are always hiring for work from home positions. All three of those links will be in our show notes at biggerpockets.com/moneyshow117. But if your tenant just lost their job, send them to that list. Maybe there’s something on there that’ll make them even more money than they were making before. Maybe there’s something that they can start generating a little bit of income. By working with your tenants, you’re showing them that you’re human. You understand that this is … I mean, we’re in uncharted territory right now. This is … I can’t remember a pandemic.

Scott:
That’s right. And, personally I have talked with my property manager. I’m willing to work with my tenants to subsidize or defer or figure out options for those of those tenants that have great credit, that have been longterm tenants and have been doing a good job with this. I’m willing to work with them and make sure … because that’s the right thing to do. Point them in direction to these types of resources and try to get them all the help that they can. And again, do my part as a landlord to help see them through this crisis. Because that’s good morals and good business.

Mindy:
Right. And if you are a tenant and you’re having problems, you think you’re going to have problems with your rent, talk to your landlord now. Start looking for other ways to generate income. But talk to your landlord now and let them know what’s going on. Hiding it, trying to avoid the inevitable is never a good plan. The ostrich head in the sand syndrome, that’s not a good way to live your life.

Mindy:
Okay Scott, I think we have answered almost every question that our group members had asked us. Right now we’re in trying times. These are uncharted waters. Like I’ve said before. We’re winging it just like everybody else. And the way that you wing it is by having a plan in place to not have to wing it when it comes through.

Scott:
Yeah. I think we’ve all prepared accidentally, by working towards financial freedom for exactly the circumstance that we find ourselves in. It certainly feels like it’s delaying financial freedom. But it is really a natural part of the cycle that we’ve all … that in preparing for financial freedom, you are preparing for.

Mindy:
Yep. So it’s now time for the famous four, except that we don’t have a guest and we’ve already answered those four questions. So why don’t we leave our listeners with four tips today, Scott.

Scott:
Yeah, it sounds great. So the first of those tips will be go to biggerpockets.com and create a membership on BiggerPockets. that will automatically subscribe you to our newsletter. And you’ll get to see the trending forum posts of the day right at the top of your dashboard. And that’s important for two reasons.

Scott:
One, we are working very hard, is produce a lot of in the moment content that directly applies to the current reality that we’re facing with the coronavirus, social distancing, those types of things, and their impacts in the real estate market. And there’s been a lot of really good pieces on there. And I think that’s just the easiest and free way to get up to date information there.

Scott:
And then the other part of it is, the things that we don’t have answers for, we’re able to crowd source. So what will the impact of coronavirus be on real estate? Well, no one knew. And that’s evolved rapidly over the last 15 days. And there’s been a thread the entire time with 600 posts of people chiming in. It’s really interesting to see the latest thinking and the differing opinions there and how that thought is improving. And you’ll get access to all of that and can the discussion there.

Mindy:
Yep. Another thing that we would suggest doing is to join our Facebook group. Go to facebook.com/groups/bpmoney and request to join. Please answer the question so we know that you are in fact a listener and not a fake person. And when you’re in the Facebook group, share what you’re going through, share your questions. Ping Scott or I or both of us and ask us for our opinion. Scott and I are both working from home. Thank you Scott, for closing the office. That was very sweet of you. So we don’t all share. Sharing is not caring when it comes to the coronavirus. We’re spending a lot of time … I don’t have a commute anymore, so I just walk downstairs, hop on the computer, and I want to help you if I’ve got answers for you. And if I don’t have answers for you, if Scott doesn’t have answers for you, we’ve got like 3000 people in the group that can help you figure out what’s going on.

Scott:
That’s right. And I just spend all day now hearting answers on Facebook. So love it. All right, the third tip is build yourself a new routine. A lot of you are going to be working from home. Do not allow that to be, I’m going to wake up late, a little bit, hung over, not work out, snack all day on unhealthy stuff. I’m speaking from experience here. This kind of stuff, right? Instead, I’m going to wake up, I’m going to self-educate, I’m going to have a healthy fitness routine, I’m going to eat well, and I’m going to make this an opportunity to develop some healthy habits.

Scott:
And as part of that, we’ve decided at BiggerPockets to just reduce the prices of all of our digital and audio books to 10 bucks flat. And if you don’t like them a money back guarantee, no questions asked. We’ll just refund your money there. So as part of that. But go self-educate in whatever way you see fit, make sure that you’re investing in that right now because that’s the easiest thing you can do and probably one of the most productive things you can do over the next couple of weeks as we wait for things to develop.

Mindy:
Yep. And any of our audio books can be found at biggerpockets.com/store. Okay, the last thing we’re going to do is ask a favor. I guess this isn’t really a tip, it’s more of a tip for us. We love making this show for you. And we are sitting here on a Friday afternoon frantically trying to get this podcast out as late in the week as possible so that we can bring you as much up to date information as we can. And we would love it if you would subscribe to the podcast and leave us a rating or a review or both on wherever you get your podcasts, iTunes, Podcast Addict, Google Play. I guess it’s Apple Podcast now, whatever it’s called. Wherever you get your shows. We would really like to hear from you and we would really love a rating and a review.

Scott:
Yeah, that’s right. We’ve actually thrown out a number of podcasts that we had prerecorded so that we could record on Friday evenings now and have the most up to date stuff for these Monday shows. So yeah, we definitely appreciate those reviews. And those honest reviews you give us on iTunes or wherever you listen to podcasts.

Mindy:
Scott, we didn’t throw them out. We are postponing them because we’ve got a series of “How I paid off my debt” interviews coming up. And they’re all really great interviews. I’m super excited to share them with people, but they don’t seem right to be released right now. So we will be releasing them later after this kind of dies down. And if you are listening to this, and you have a friend that you think would benefit from this information, please share it with them.

Scott:
On that note, due to the quarantine, I decided that I … and the snow really, I decided I’m only going to be telling inside jokes from here on out.

Mindy:
Oh my goodness, I’m still going to quit every single day.

Scott:
So the first one of those is I recently run out of toilet paper and I’ve had to begin using old newspapers and man, the times are rough.

Mindy:
Oh.

Scott:
All right, well thank you for listening everybody. And we hope that you have a wonderful week at home and make the most of your situation.

Mindy:
Yes and yes, thank you for listening. We really appreciate it. We would not be able to do this without you because there would be nobody to do it for. Just a reminder, all of the links that we mentioned can be found in the show notes at biggerpockets.com/moneyshow117. All right, from … that just sounds weird. I just gave the link and then from episode 117 of the BiggerPockets money podcast, I am Mindy Jensen and he is Scott Trench and we are locked inside, so send us … Oh, send terrible jokes to [email protected]

Scott:
Only quarantine related jokes. Tasteful ones, please.

Mindy:
Oh, I had a joke. Somebody sent a joke. I thought it was great. I said I was going to use it in my podcast. He had it on Twitter. Morgan Housel is one of my favorites and he had it. I think I sent it to you, Scott. Let’s see. Oh, nope. That’s not it. Oh, why does Norway put barcodes on the side of their boats? So when the ships come back to port, they can Scandinavian.

Scott:
Ah, well now I’ve got to tell my one about Finland. Finland’s just closed their borders, so nobody’s going to be crossing the finish line anytime soon.

Mindy:
Oh my goodness. Okay, so the one that I told is from Rory Karen. Thanks Rory.

Scott:
Now we just need a Swedish joke to round things out. Please tell us in Facebook please.

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In This Episode We Cover:

  • How to invest from a position of strength
  • How to tackle debt during this time
  • How to do a “financial reset
  • What the 4% Rule is with regard to financial independence
  • Brandon’s tip when tenants don’t pay rent
  • Practical things landlords can do right now
  • How to thrive of the current situation
  • List of resources for those who are out of work
  • BiggerPockets reminders that you should consider
  • And SO much more!

Links from the Show

Books Mentioned in this Show:

Tweetable Topic:

  • “You shouldn’t be investing in real estate without reserves.” (Tweet This!)

Connect with Scott & Mindy:

The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager and Podcast Director Mindy Jensen and CEO Scott Trench weekly for the BiggerP...
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    Katie Rogers from Santa Barbara, California
    Replied 6 months ago
    Median earnest money in my community is about $30,000
    Katie Rogers from Santa Barbara, California
    Replied 6 months ago
    On April 1, we took on a new tenant week to week.
    Katie Rogers from Santa Barbara, California
    Replied 6 months ago
    Rent agreements should always be month to month for the reason Mindy mentioned. People can suddenly lose their job even when there is no virus out there.