Why aren't the leaders of Bigger Pockets addressing this crash?

7 Replies

Hi there, I'm a longtime lurker and investor who has gotten tremendous value from this website, the podcast, and the books. After bailing out of buying two duplexes last week and speaking to several RE veterans, I came here tonight wondering what Brandon and David have to say about what might happen to the real estate market when nearly every factory, brick and mortar storefront, office, and business in this country shuts its doors. I was pretty surprised to discover that it was -- nothing!

Am I missing something?? I can imagine that the podcasts are recorded in advance, but I wonder why our fearless leaders haven't yet addressed the single most important -- by leaps and bounds -- situation that we're all facing right now. I'm incredibly grateful for all their insight and experience over the years, and am curious (and in need of guidance) about WTF to do with the insanity unfolding around us. 

Maybe they don't think what's happening is a big deal. Maybe you don't either. Maybe you're sitting on a mountain of cash and you know you can cover every expense until 2026. If so, good for you. But the whole emphasis of this website (rightfully, in my opinion) is **leverage. Which means some of us who made proper cash-flowing deals will be twisting in the wind if our tenants can't actually pay their rent just 'cause the company they work for is gone and no one else is hiring.

Anyway, I'm of the opinion that this is in fact a big deal. I really, really, really hope I'm wrong. But this is what I wrote in response to a question about the impact of the coronavirus in real estate:

"A lot of these answers sound unrealistic. The economy is going to come to a near standstill, with people hiding in their homes. Most businesses have no more than 30 days of cash saved, and most individuals have less than that. Businesses won't be able to pay workers. Workers won't be able to pay rents. What are you going to do, throw your renters out that can't pay? Do you really think there are lots of other well-paid workers out there waiting to rent your place? This crisis hasn't even arrived, economically speaking. I don't mean to sound cruel, but millions of people are going to die, creating significant inventory. Millions of others are going to move in with their friends and family. This is going to be a bigger crash than 2008. Businesses are going to crater. Bankruptcies are going to skyrocket. Banks are going to have to decide whether to foreclose on the majority of their holdings for nonpayment. All us landlords are going to have to decide at what point do we evict non-paying tenants. All that cash we've been saving up for the correction is going to get eaten up by months of net losses. I know this website is all about encouraging each other, but it's time to put down the pom poms and get hardcore realistic. Batten down the hatches –– it's about to hit the fan!"

This disease is going to take months and months to work its way through the population. It's going to be a year or more before there is any kind of vaccine. People are going to be scared -- for their elderly relatives and friends if not for themselves. Airlines are going to be grounded for months. Airbnb/hotel/restaurant/bar/coffee shop activity is going to evaporate. No more massages, chiropractic appointments, movie theaters or malls. Maybe Amazon shipping warehouses won't shutter. Maybe UPS will keep running. Will you be able to get a plumber to come out? How will utilities keep water and power up when people can't work together in offices? 

I dunno. But the logical conclusion of this is a massive, months-long, world-wide economic crash. I thought real estate was bullet-proof, that the games that made it vulnerable in 2008 had been cleaned up. But a pandemic which kills millions and shuts off the majority of economic activity is the kind of black swan event that no one predicted and no one can respond to with 100% accuracy.

I think, though, that it's time we started trying.

@Paul Durham   Yup, it probably will be a huge event, and no business is going to be totally insulated from the effects of the economic fallout.  My hope is that the virus dies out over the next few months, and people can start getting back to business.  I have enough reserves to last for a while, so I'm not too worried about myself, but this will likely be hard hitting for many people.  

My only advice is to save as much money as you can right now. How many rentals do you own?  I have ten, so it's not likely that they will ALL have tenants who can not pay rent at the same time.  

What kind of expectations do you have for BP? All of these issues have already been addressed here ad nauseam. Although there will likely be some effect on the housing market, a retreat, recession, whatever you want to call it, the cause might be different, but the fundamentals of what you should (or should not do) are always the same. There are posts, blogs and podcasts here that have addressed this issue from the recession ten years ago as well as the neverending parade of doomsday sayers starting threads here on what to do during the next recession over the last ten years.

I'm not saying that nothing is going to happen- highly likely that it will, but the fundamentals remain the same- know your market, buy cashflow positive properties, don't over leverage and have multiple exit strategies. The numbers might look different over the next couple months or years, but what you should do doesn't change. It's like riding a bike- maybe over the last few years you've been able to do some pretty sweet 360s off the ramp in your driveway- maybe for the foreseeable future, we all focus on just not falling off. 

Hi @Paul Durham thank you for raising the question. I produce the BiggerPockets Podcasts. You're right that we try to record podcast episodes well in advance for a number of reasons. Last week, it wasn't possible to pull off a last-minute Real Estate Podcast episode as news was developing so quickly.. nor am I sure it would have been wise, given the fluidity of the situation. Things were quite different as recent as last Wednesday (the last day we could have recorded).

However, this Thursday, we will have a wide-ranging conversation about the economy and its impact on real estate investors. Hope you enjoy it and get value out of it. In fact, all 4 podcasts will have topical episodes this week. The Money Podcast's is here: https://www.biggerpockets.com/blog/biggerpockets-money-podcast-116long-term-investingcovid-19-jim-collins-jlcollinsnh-com In my view, the key for us is to stay agile and provide clearly thought-out content based on data and historical context -- rather than just adding to the noise. Thanks again, and stay safe.

@Paul Durham

Thanks for this post. I am the CEO and President of BiggerPockets. 

For years, we have preached the virtues of investing for cash flow, investing with adequate reserves, and investing for the long-term. I'm so adamant about investing from a position of financial strength that I wrote a book about it, and host a podcast every week where we talk about nothing but building a rock solid financial foundation capable of supporting financial freedom and large-scale real estate investments. 

The beautiful thing about BiggerPockets, though, is that it doesn't really matter what I have to say. You can come here and absorb the perspective of thousands of investors, across millions of pieces of content. Every week for the past year, threads, blog posts, and commentary have talked about what to do in the event of a market downturn. Our community, left largely uncensored (except for the 5 "S" - Sales, Sleaze, Spam, Self-Promotion, Solicitation), has discussed how to handle a recession or similar economic environment ad nauseum, to steal a phrase from @Corby Goade .

But, let's address your questions here specifically. 

While I've been monitoring the situation for weeks, last week was really a turning point for me, as it was for many investors. Last Monday/Tuesday, I was of the opinion that we were in for a limited impact. By Thursday/Friday, the writing was on the wall that there were going to be major economic and lifestyle implications of this disease. 

We've responded radically since my decision midday Thursday. Starting with our community health and safety, BiggerPockets' offices are shut down through the end of March. We had already been making a point to discuss hygiene and travel, in addition to requiring employees who had visited certain parts of the country to self-quarantine. We have to do our part to limit the spread of this thing as a business.  

On Friday, Mindy and I were up late recording a podcast with author JL Collins of "The Simple Path to Wealth" - this aired early this morning and specifically addresses investing decisions in light of the coronavirus economic impact. You can listen at www.biggerpockets.com/moneyshow116 or wherever you listen to podcasts. Our team worked through the weekend to put that out live - again, this is within days of my true acknowledgement that this virus is here and going to make an impact. You can certainly call me out for not moving earlier in the week last week, or even the week before. I kind of followed the timeline of the NBA...

Our blog and forums have already responded with a slew of coronavirus related topics. I wrote a piece to air this week on the blog. Mindy and I were here very late on Friday and our team worked through the weekend to get that new podcast for the Money Show out, referenced earlier. It released early this mornnig with renowned expert JL Collins of "The Simple Path to Wealth. We are mulling over how best to give people free or extremely low price access to "Recession Proof Real Estate Investing" to help address fears. We are recording a podcast Wed with J Scott, myself, David, and Brandon to talk about the economy and it's likely impacts on real estate. We believe that inivestors and economy participants of all sorts will feel the impacts of this, but we think there is plenty of time for real estate investors, and little impact for those investing for cash flow and for long-term wealth. Good habits, finanically, continue to be the key as always.

Regardless, I've asked the team to change our entire content calendar to react swiftly to this disease. To their credit, they are responding beautifully and aggressively, with immediate impact. BUT, they have had less than 12 business hours since I made the call. Expect a massive shift in what we are doing to hit this week.

And, I personally apologize. I perhaps should have gone live somewhere on the forums, social, etc. as early as Friday morning last week. And, I should have seen the large-scale quarantines coming if not weeks earlier than I did, at least by a few days!

Thank you @Kevin Leahy and @Scott Trench  for your thorough and timely responses. As always, your organization is on the cutting edge and not just blathering out corporate-speak. I look forward to the podcasts and blog posts, as well as more of the community's group genius.

It's interesting that Italy just suspended mortgage payments. I wonder if that will apply to landlords affected by tenants who can't pay their rent.

It's definitely gonna be a whole thing. Glad you're here as a resource!

What do the say about the tide? When it goes out you can see who has been swimming naked. Well, the tide is receding. All the high leverage gurus on here who live by OPM will die by OPM. This movie has been made before. The trigger event may change but the rest does not. How deep will RE be hit? Who knows. You paint the most pessimistic scenario. In reality, the world cannot stop because of this virus. This is an early attempt to contain it and it is the right thing to do (and should have been done earlier). But it looks to me like a 3-6 month cycle IF we manage to contain it. If not, I don't know how the world will react. Businesses and Borders cannot be closed forever. Life will eventually resume.

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