Coronavirus Silver Lining: How the Economic Fallout From COVID-19 Can Benefit Shrewd Investors

Coronavirus Silver Lining: How the Economic Fallout From COVID-19 Can Benefit Shrewd Investors

3 min read
Philip Michael

Philip Michael is the founder of NYEG, a real estate and VC company with $80MM in the development pipeline.

Experience
Philip is the bestselling author of Real Estate Wealth Hacking: How to 10x Your Net Worth in 18 Months. He’s also an expert columnist who’s been featured on Forbes, Black Enterprise, Entrepreneur, and other media outlets.

Formerly, he was a TV/radio host on SiriusXM and Fuse. Philip’s also the founder WealthLAB and DealFLW, a free real estate investment analyzer—both of which have been recognized by Forbes.

Philip and his team are currently developing a series of historic projects, including the first black-owned high rise in Jersey City, the first smart home development in Jersey City’s McGinley Square, and the first voice-controlled student housing building in Philadelphia.

A native of Denmark, Philip came to New York in 2014 with $79 in his PayPal account. In 2015, he joined Bisnow Media (the largest commercial real estate news source in North America) and helped lead them to a $50MM sale as national editor and director of content strategy.

In 2019, NYEG launched a Venture Capital arm, which invests in minority and/or women-owned, early-stage startups.

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“Those who remain calm in the eye of the storm are those who stand tall when the smoke clears.” —Myself

“The time to buy is when there’s blood in the streets.” —Not myself, but Baron Rothschild

I’m going to keep this one short and sweet, compact and crisp. So, here goes. I wrote a story a few years ago right here on these pages, which just ran again recently, highlighting how to invest during a recession

Yes, it’s all over the news. Yes, we must take precautions. And this is a serious time.

However, it is here. And in spite of the horrific carnage, there’s a silver lining to the social distancing. It’s times like this when it’s beyond beneficial to be a resourceful entrepreneur/investor. 

I wrote the aforementioned piece based on a coffee chat with super entrepreneur and real estate investor Neil Patel, basically outlining why mass scares are gold rushes.

“A crisis is the best time to buy,” he said then. 

And while I urge everyone to stay safe and sound, there are many reasons to be bullish on what awaits us on the other side. Here’s why the COVID-19 pandemic is creating mass opportunities to get ahead in the game. 

Low Interest Rates Help Real Estate Investors During a Recession

In Europe, negative interest rates have been a thing for quite a while with outrageous mortgage rates in the 0.5 percent range. We just broke ground on a student housing complex in Philly, using Euro financing to the tune of 2.5 percent—non-recourse, baby.

My nephew/partner (you may have heard of him if you’re into soccer) recently scored 0.9 percent on a 30-year mortgage on a massive Madrid property.

Now, because of all this chaos, the Federal Reserve has taken emergency action, cutting interest rates to darn near 0 percent—a reactive attempt to try to offset the impact of the coronavirus outbreak.

The facade of the Federal Reserve Bank.

So, what does that mean? Well, it means that if you own real estate, assets, anything, you can refinance and cash out. 

In even more layman’s terms, if you have a mortgage at 4 percent, cut that bad boy to whatever low rate they’ll give you, and save that extra money.

Or even better, refinance your property.

Let’s say you owe $300K on your $500K property. With interest rates down, refi at $350K, pocket the $50K, and launch your business idea. 

Related: The Fed Cut Interest Rates to 0% — What Does This Mean for You?

Stocks Are Nosediving—Buy, Buy, BUY!

I’ve made my position on stocks clear in this column in the past. As an asset, I don’t love them. They’re too volatile, too tied to hysteria and public opinion—things that can be swayed with a single news report.

Even when it benefited me tremendously, I still didn’t feel comfortable about something so innately erratic.

That doesn’t change the fact that if the opportunity’s there, it’s there. And it’s there right now. 

As of mid-March, the Dow Jones Industrial Average fell almost 3,000 points—the worst single-day losses since the Black Monday crash of 1987. In fact, it’s the biggest one-day plunge ever and the largest drop of the month-long downturn. 

closeup of man holding smart phone checking stocks

I’ll tell you what. This means that you’re literally staring at the Black Friday of stock sales. There are stocks right now that—outside of this crisis—have rock-solid fundamentals.

In fact, there are stocks that dropped that actually are looking at potential upticks due to people staying at home and needing things to do.

Netflix is one. On March 13, the streaming giant had a market value of 147.57B. Today? 163.72B.

Related: Why Real Estate Beats Stocks During a Recession

OK So, What’s Next?

Look, I’m not gonna pretend to be a stock expert. I’m a simpleton, in fact. But this seems to make sense. CNBC’s Jim Cramer points to 10 major companies—think Shopify and Square—whose business models stand to benefit from a widespread quarantine. 

This is in no way an endorsement of these stocks. And hey, you could always just pick up some mutual funds, run by some sophisticated investors that do nothing but study the market all day.

Heck, even REITs are down, and in my opinion, there’s nothing in their business models—particularly office REITs—that is likely to change mid- to long-term with this.

(The tenants? Well, that’s a different story. But they’re likely locked into long-term leases, forcing them to take the hit.)

Because once the market recovers—and trust me, it will, because it always does—you’ll be sitting on a pretty penny. If anything, if you’ve been on the sidelines waiting to get started on your portfolio, even if it’s just $100 or less, you’re really out of excuses.

Just do it, my friend. You’ll be happy you did.

Happy investing and feel free to slide in my DMs for some real estate chatter.

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Are you actively investing currently? In what and why? 

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