Attention new real estate investors (or really any real estate investor), as I filmed the video below, everyone across the world is practicing this social distancing thing. Well, not everybody—but most people are. And here’s the situation we find ourselves in today. There are businesses shutting down left and right. People are being laid off. There’s a lot of uncertainty out there.
It’s a weird time. And the annoying thing is we don’t know when it’s going to end.
I want to talk a little bit about what you should be doing today. There are experts that say this is going to last two, three, four, or 10 years. The world’s going to dissolve into chaos and we’re going to start wearing all leather and turning our vehicles into battle tanks to scavenge the earth for the few remaining resources. But others believe it is going to bounce back in a month or two, and we’ll be right where we were.
I tend to fall into the second camp. I choose to be optimistic about the situation.
But of course, the former is always possible. I just don’t look that good in leather.
So as a new investor, what should you do? Well, let me offer my thoughts.
4 Productive Ways for Real Estate Investors to Spend Their Quarantine
1. It’s OK to wait a little bit.
Look, I don’t think it’s the worst idea in the world to wait to invest in a property for a few weeks—wait until things stabilize just a little bit.
This isn’t a competition or a rush. Waiting to get a little bit of stability wouldn’t be a horrible thing right now. Things might stabilize into the old norm or they might stabilize into a new uncertainty-driven norm.
Here’s what I mean by that.
Imagine you’re on a ship and a storm hits. The storm makes you want to grab a handrail or a rope or just hang on. That’s just common sense.
That’s where we are right now.
But if the storm continues day after day after day, it’s like people are gripping that rope forever. Eventually, the rocking to the boat just becomes the new norm. And you adjust, you build more handrails, you get more ropes. But at least the unpredictability becomes kind of predictable.
So I’d say it’s fine to hold off a month or two to see what happens here at the start. But I don’t mean wait until you think we’re at the bottom of the market or wait until things get all happy again—because you never know when it’s going to be. Understand that recessions never feel predictable.
Back in 2008, when the economy started falling apart, no one knew how bad it was going to be. No one knew where the bottom was or whether we’d bounce back. There was a lot of talk back then, a lot of fear about a double-dip—but it was supposed to be way worse than the first time! And it really didn’t happen.
You know what? During that time, I stuck to the fundamentals, and I still invested in real estate. I didn’t let fear or uncertainty hold me back. That led to millions of dollars in wealth creation over the next decade.
To recap, it’s OK not to invest right now for a couple of weeks if you want to wait. Don’t feel bad about that. But that doesn’t mean you should take the month off. This is a perfect time to prepare to invest in the new world that we’re going to see after this lockdown is over.
What does that mean? Well, that brings me to the second point today and something you definitely should be working on right now.
2. Establish crystal clear criteria.
During this time, aim to get super clear on what I call the “high five criteria”:
- Type of property: Single-family, multifamily, self-storage, etc.
- Location: Specific zip codes you want to focus on.
- Condition: Do you want something that’s a fixer-upper or already fixed or in between?
- Price range: Are you buying on the lower-end or the higher-end?
- Profitability: What kind of return are you looking for? What kind of profit would make the deal worth doing?
For example, one of my rules of thumb is that I want to see at least a 10 to 12 percent cash-on-cash return in the first year. It basically means whatever money I invest in the deal, I’d like to see at least 12 percent of that back in profit from the cash flow on a rental during the first year.
You know, so many investors haven’t yet decided what they want. So they waste so much time trying to figure that out.
Now, how do you know what you want? How do you know what you should get into? What’s your high five?
Well, a couple of suggestions.
- Listen to a lot of real estate podcasts. I’m not just saying that because I’m the host of the BiggerPockets Podcast. But really, any interview-style real estate podcast about this world of investing can help you get a broad overview of a lot of different ways that people invest. Look for stuff that excites you.
- Use this time to connect with other investors in your area. Ask your friends in the market for their landlord’s phone number or ask them for local real estate agents or who the best flippers are in your market, and get on the phone with them. If it’s working for them and it fires you up, it’ll probably work for you.
That’s how I decide my high five. Additionally, during this time, brush up on two other really important skills. That’s going to be point three and four. Let’s go to number three now.
3. Use this time to work on dialing-in your lead gen process.
The lifeblood of any real estate investor is your ability to get leads. The more and better leads you get, the more and better opportunities you’ll have for buying home run deals. So now is the perfect time to get really dialed in on that.
For example, maybe you’re going to choose using a real estate agent for your lead source, which isn’t a bad option for new investors. This is the perfect time to start finding agents who are awesome and get them to set you up with automatic emails for properties that meet your high five criteria.
Or maybe you want to do a more off-market approach, like direct mail marketing. Now is the perfect time to research the best list you can mail to. What should your postcard or letter look like? Get that dialed-in right now.
All right. Moving on to tip number four for you.
4. Use this time to develop your deal analysis skills.
You know, I firmly believe deal analysis is the number one most important skill a real estate investor can have—above negotiation, above lead gen, above everything. Because once you know how to analyze deals quickly and efficiently, everything else becomes a little easier. Like you’ll be able to find great deals, and you can attract partners or lenders to fund it.
Analyzing for great deals helps you avoid buying duds that could set you back years. Your great deals will help you make more money so you can retire earlier (if that’s what you want). Unlike stocks, where everyone’s just hoping and guessing, with real estate, we can get a pretty good estimate on what the future looks like.
Now, of course, on BiggerPockets we have calculators that make this really easy, which I’m sure you probably use. But regardless of how you analyze your properties, analyze, analyze, analyze.
During this time, in fact, I would encourage you to set a goal to analyze 100 properties that meet your high five over the next three months. After you’ve analyzed 100 properties, you’re going to be so incredibly prepared and confident to start making offers and confident in your math skills.
Of course, if you need help with that, like I said, BiggerPockets has these amazing investment calculators that help you accurately run the numbers on a flip, a rental, a BRRRR, a wholesale, or a rehab project. And you can do it under five minutes. So check them out at BiggerPockets.com/tools.
Now, finally, what about all the fears today?
Tenants aren’t going to pay rent. Foreclosure moratoriums. Evictions are being halted.
Well, as I said in the beginning, there’s really no way to know how long this thing’s going to last. And so I can’t perfectly say what you should do in those situations. But I guess I’d just say this.
Even if this lasted a year and it tanked a lot of the economy for a while, and even if you didn’t make a ton off this, 20 years from now, how much is that going to matter? Like even if you got no rent for a year and you lost some money, you struggled a little because you bought a property and the economy turned worse in the long-run, the experience and the momentum is more important than the money right now.
So if you have the financial resources to handle whatever might come in the next year, I don’t think I would slow down too much.
You know, most of the properties I bought in 2008 through 2012 when the market was going down, they didn’t make me a ton of money long-term. But they did give me a ton of knowledge, experience, and confidence that led to a pretty successful portfolio today. I wish the same thing for you.
So don’t let fear stop you.
One final thought—do you ever watch a baseball game and prior to the batter stepping up to the plate, he’s swinging like four bats all at once and practicing? Why does he do that?
Because those four bats are heavy, and his body gets used to swinging four bats for that moment. And then he drops three of them, and he steps up to the plate and that one feels super light. He’s able to hit the ball further.
The same is true for real estate. I believe right now we are in a special time where it is hard to invest. But that just means we’re practice-swinging with four bats right now—or maybe five.
And that’s a good thing. Because when the market changes, that extra work now is going to make it so much easier to knock it out of the park later.
I hope this video provided a few things for you. First, inspiration. Second, encouragement. Third, some tactical things you can start doing in this crazy COVID-19 world today.
What are you doing to stay productive during quarantine?
Share in a comment below.