Your Cash Flow During This Virus Crisis and After
Most Popular Reply
Real Estate Broker 路 Cody, WY 路 Member since 2010 路 28k+ posts 路 41k+ votes
6yI believe the threat has been greatly exaggerated but it's a train that can't be stopped.
Nobody can predict how long it will last or what the impact will be. What we do know is that a majority of individuals and business owners are woefully unprepared financially. In one week, individuals were already screaming for handouts. It's been two weeks and I'm seeing a large number of businesses owners following suit.
The economy has been booming for years. Why don't people set aside just 10% during the good times to prepare for the bad?
I've watched business owners brag about growth and now they're applying for loans and hoping Uncle Sugar bails them out. Individuals have spent their money on fancy cars and pickups,but now they can't afford to go without pay for two weeks?
COVID is pulling back the curtain and exposing the pretenders. Many of them will crash and burn. Those that spent the last few years living wisely and preparing for a rainy day will not only survive, they will thrive as they buy out the weak.
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19 Replies
- Real Estate Agent 路 Kansas City 路 Member since 2018 路 4k+ posts 路 3k+ votes6y
There will be lay offs til the lock downs are lifted. Tenants won't pay. You can always speak with your lender on a solution. Reserves should be in place just in case on any properties you buy. If you are over leveraged then that's where the danger is.
- 6yBjorn AhlbladPro MemberInvestor 路 Shelton, WA 路 Member since 2017 路 6k+ posts 路 6k+ votes
I am optimistic, we have a few tenants who will be affected. But they are very employable and won't be down for long-unless of course everyone is. The talk of existing drugs and their effects on this virus is very encouraging. I am glad to have chosen mainly REI instead of dumping a bunch of money in the stock market my money there has not fared well. Personally I don't see evictions as an effective tool for Covid 19 so I don't care whether we have them or not right now.
- 6yJay HinrichsBusiness MemberReal Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
Originally posted by @Caleb Brown:
There will be lay offs til the lock downs are lifted. Tenants won't pay. You can always speak with your lender on a solution. Reserves should be in place just in case on any properties you buy. If you are over leveraged then that's where the danger is.
its not really the overleverage its the lack of cash liquity.
- Rental Property Investor 路 Red Bank, NJ 路 Member since 2017 路 1k+ posts 路 1k+ votes6y
I have had some fat years because I repositioned my properties. I can cover myself. I am looking to have expenses covered- that will be a non-issue. My wife and I have w-2's and we are teleworking, thank God.
If things continue to go sideways, then I have 2 inherited, rent controlled units who may fall behind. I will reassess when this is over. Otherwise, the rest of my tenants are teleworking for now.I was just beginning to worry about not having my carry forward loss for 2020... funny how things workout!
- Rental Property Investor 路 Los Angeles, CA 路 Member since 2017 路 2k+ posts 路 5k+ votes6y
My opinion on this may be colored due to my belief that this isn't nearly as serious as people are making it out to be. A massive majority of infections are where the symptoms are mild. Most of the deaths are people with weakened immune systems (elderly and those with other serious health problems). It's not killing everybody it touches. Since the beginning of this "wiping out of humanity" virus we've had 11,000 deaths. There are over 150,000 deaths daily. I'm having a hard time calling a few hundred extra deaths a day a serious issue.
A realistic outlook for this virus wreaking havoc on the world is a couple of months. Once the panic is over most of these people will be hired back to the same jobs. We had extremely low unemployment. Even with businesses closing we'll still have a tight labor market.
Most of the people who are being laid off will be getting unemployment. In CA that is 70% of your highest wages over the past 18 months. That should be enough to pay your rent and put food on the table. On top of this there are serious calls for the government to provide immediate cash to people to pay their bills. It's an election year. No politician wants the voters to be evicted or not able to pay their bills.
Assuming that they don't pay the rent, all good landlords should have a security deposit to draw from for at least one month. Governments will start allowing evictions fairly soon. It's not like a deadbeat will be allowed to stay in the unit forever. While many politicians are anti-landlord, they aren't going to allow deadbeats to remain in so long that a landlord defaults on the property. They are pushing for banks to temporarily skip mortgage payments and to either instead extend the loan those months or increase the monthly payment for a few months to cover the missed payment. Banks don't want to foreclose. They learned their lesson from 2008. Politicians also don't want landlords walking away from properties. They know it would cause supply to dry up and create more havoc in the rental marketplace.
Through unemployment and government assistance, I suspect that a large portion of people will be able to pay their rent. A small percentage may choose not to since they know they can't be evicted. Those you just have to wait out or buy out.
- Rental Property Investor 路 RI 路 Member since 2017 路 94 posts 路 52 votes6y
@Greg M.
I reached out to all my tenets (9). One was laid off and gets social security. Another had her hours cut. Both can receive unemployment under the new rules. Most states have made unemployment readily available to those affected . They should also get a stimulus check.
I imagine this will blow over in a couple weeks and things will go back to normal for most.
- Real Estate Broker 路 Cody, WY 路 Member since 2010 路 28k+ posts 路 41k+ votes6y
I believe the threat has been greatly exaggerated but it's a train that can't be stopped.
Nobody can predict how long it will last or what the impact will be. What we do know is that a majority of individuals and business owners are woefully unprepared financially. In one week, individuals were already screaming for handouts. It's been two weeks and I'm seeing a large number of businesses owners following suit.
The economy has been booming for years. Why don't people set aside just 10% during the good times to prepare for the bad?
I've watched business owners brag about growth and now they're applying for loans and hoping Uncle Sugar bails them out. Individuals have spent their money on fancy cars and pickups,but now they can't afford to go without pay for two weeks?
COVID is pulling back the curtain and exposing the pretenders. Many of them will crash and burn. Those that spent the last few years living wisely and preparing for a rainy day will not only survive, they will thrive as they buy out the weak.
The DIY Landlord Book4.7248 Reviews - 6yJay HinrichsBusiness MemberReal Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
Originally posted by @Nathan Gesner:
I believe the threat has been greatly exaggerated but it's a train that can't be stopped.
Nobody can predict how long it will last or what the impact will be. What we do know is that a majority of individuals and business owners are woefully unprepared financially. In one week, individuals were already screaming for handouts. It's been two weeks and I'm seeing a large number of businesses owners following suit.
The economy has been booming for years. Why don't people set aside just 10% during the good times to prepare for the bad?
I've watched business owners brag about growth and now they're applying for loans and hoping Uncle Sugar bails them out. Individuals have spent their money on fancy cars and pickups,but now they can't afford to go without pay for two weeks?
COVID is pulling back the curtain and exposing the pretenders. Many of them will crash and burn. Those that spent the last few years living wisely and preparing for a rainy day will not only survive, they will thrive as they buy out the weak.
In my mind any landlord that is paniced becasue they will not recieve one or two rent payments falls under your description above.. they need to reassess the proper way to prioritize their cash flow and funding to have reserves / emergency fund.. need a little more Dave Ramsey not refi till i die i have to own 30 doors in one year making 100 a door so i can quite my day job :)
- Austin, TX 路 Member since 2019 路 5k+ posts 路 5k+ votes6y
The people who took out HELOC's on their personal homes (borrowed) to be able be in this business might be facing a double edged sword if their W2 income is effected by this.
Losing their homes would be a tough blow, a lot tougher than having to sell off an under performing SFH rental.
It used to be called "Betting the Farm".
Hopefully we pull out of this thing before it gets that bad.
- Rental Property Investor 路 Ankeny, IA 路 Member since 2017 路 2k+ posts 路 3k+ votes6y
Well, when the government gives a tax rebate during the good times, it's not surprising people also do not save during the good times. Let's be honest, if most people did that, you'd have a lot of vacancies as most of your tenants would be owners.
I will not be forgiving rent or debt, or giving any discounts. I'd rather people owed me than just outright forgiving their debt. I have chosen a career and investments that leave me not living month-to-month. It's not my fault my tenants have not done the same. Our policies will change slightly, as the government will force that upon us (temporarily no evictions). But eventually things will get back to normal. And if tenants cannot pay their rent, they will be asked to leave, or evicted. Hopefully their debts will not exceed their damage deposits.
- Investor 路 Chicago, IL 路 Member since 2009 路 1k+ posts 路 1k+ votes6y
Workforce housing will have performance decline.
Section 8 housing is semi protected. Remember, that most Section 8 tenants have a tenant portion and few have reserves. Housing in stronger economic areas have tenants that probably have some reserves and resources. Performance less risky.
Hotels are going to be in trouble until the pandemic slows considerably. Other sectors of real estate have problems too. Commercial investors with retail real estate will have stressed tenants, as businesses are not open.
Next month, we will start to read comments on how people are dealing with their newly delinquent tenants. I am creating a strategy in preparation.
I have enough cash reserves so I don't have to hand properties back to the bank. I expect banks to start forbearance on mortgages. There will not be a massive default of mortgages during this downturn. My prediction.
- 6yJay HinrichsBusiness MemberReal Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
Originally posted by @Brian Ploszay:
Workforce housing will have performance decline.
Section 8 housing is semi protected. Remember, that most Section 8 tenants have a tenant portion and few have reserves. Housing in stronger economic areas have tenants that probably have some reserves and resources. Performance less risky.
Hotels are going to be in trouble until the pandemic slows considerably. Other sectors of real estate have problems too. Commercial investors with retail real estate will have stressed tenants, as businesses are not open.
Next month, we will start to read comments on how people are dealing with their newly delinquent tenants. I am creating a strategy in preparation.
I have enough cash reserves so I don't have to hand properties back to the bank. I expect banks to start forbearance on mortgages. There will not be a massive default of mortgages during this downturn. My prediction.
Agreed mortgage lenders learned their lesson in the GFC I see them as being far more proactive.. I have seen some internal memos from lenders and what they will want to see is landlords stack cash and use their reserve funds and put off major cap ex to keep mortgages current if those things are done and there are still issues i see them helping.
- 6yPeter TverdovBusiness MemberDeveloper 路 New Brunswick, NJ 路 Member since 2015 路 1k+ posts 路 2k+ votes
Wondering what happens to all the people who told me their reserves was a LOC or a credit card.
My reserves were in the market so it went from 6 months to probably 3-4 if no one pays and I'm nervous but not as much as I was last week. I can't imagine the person(s) who followed the BP mantra of BRRRR until your face turns blue and have no equity in any property and cash flow $200 a door....oh and in a C area. Good luck.
- Rental Property Investor 路 Los Angeles, CA 路 Member since 2017 路 2k+ posts 路 5k+ votes6y
Originally posted by @Peter Tverdov:
Wondering what happens to all the people who told me their reserves was a LOC or a credit card.
The well to do seem to think there is going to be a liquidity crunch. LOC are quickly being tapped before they get closed/lowered. The money isn't being spent, it's just being drawn in case they need it and parked in another account. Some banks are tapped out and needing to draw funds from outside sources. The Fed is going to need to pump in massive amounts of money.
- Real Estate Agent 路 Naples, FL 路 Member since 2016 路 298 posts 路 268 votes6y
@Scott Mac I already have tenants calling to say they cannot pay rent. Our courts stopped taking evictions on March 16th until further notice, so there is literally nothing I can do but try to work with them. Thank God for my sec 8 and dss tenants. I have four vacancies right now and intend to fill it with the same
- 6yKenneth GarrettPro MemberInvestor 路 Florida Panhandle/Illinois 路 Member since 2016 路 4k+ posts 路 3k+ votes
I have prepared for emergencies on my rental properties. I kept approximately 6 months of expenses in the bank. I don鈥檛 really feel landlords need to forgive rent. In Illinois they just started the stay at home effective yesterday at 5:00 pm. Essential service employees continue to work. I did have a tenant call me about about reduced work. They can pay rent but will probably be short. I will work out the rent short fall. I am prepared for a few months to handle this event. This is why on BP the stress of cash flow is critical and not invest in negative cash flow properties. Positive cash flow is critical and keeping funds for emergencies.
- 6yJay HinrichsBusiness MemberReal Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
Originally posted by @Peter Tverdov:
Wondering what happens to all the people who told me their reserves was a LOC or a credit card.
My reserves were in the market so it went from 6 months to probably 3-4 if no one pays and I'm nervous but not as much as I was last week. I can't imagine the person(s) who followed the BP mantra of BRRRR until your face turns blue and have no equity in any property and cash flow $200 a door....oh and in a C area. Good luck.
Very good points.. Helocs can get frozen ( read the fine print) I bet 90% of those who have heloc's have no clue they can be frozen unilaterally by the lender. There was a post about a year ago maybe a little more were an LA W 2 who had a nice run up in their values pulled like 150 to 200k in a second on their personal home and then used that money to buy ( what he admitted to) D class in Memphis
that on paper was going to generate a nice positive cash flow He also borrowed on those properties I think it was 8 of them so 100% leveraged on D class.. not that D class is any worse in Memphis than any other location It just stuck in my mind..
So when he made the post he got about 100 UP Votes on BP so you know where the mind set is on this site.
I then made a post ( YOU DID WHAT WILLIS? ) LOL. and I laid out the risk factors. and I got 50 up votes.. so you can see there is a divide here on BP between as many doors at what ever cost or method you can get them and risk does not matter because Cash flow rentals are the safest thing to buy in the US and appreciation Is gambling etc etc. when in fact appreciation is the ONLY reason this person could do this.
There is nothing wrong with owning rentals but you simply cant drink the got to have as many doors as possible as quick as possible cool laid unless you have the financials to back it up. Not leverage but high paying wages or true cash reserves..
Now being in the market I think you only take a loss if you sell now I am fully expecting it to bounce back significantly once this Virus stuff gets settled down.. I had zero in the market so I am not an expert at it at all. but I do think I am going to partake at this once in a generation buying opp.. I wanted to in 2009 when it went down to 6k but had too many real estate problems to deal with.
- Rental Property Investor 路 Red Bank, NJ 路 Member since 2017 路 1k+ posts 路 1k+ votes6y
@Nathan Gesner I could not agree more!
We are in spending mode here having gutted and framed out another apartment.
WOW! The negotiating position you have now with cash on hand and work to be done! Many contractors are barred from the homes they were working on because of family isolation.
Another reminder that cash is king. (And construction, Hardware is deemed essential here in NJ!)
And the added benefit of not blowing my load is that I am still bouncing around in my Beat-up Hyundai and 02 Ford Ranger... I gotta think that will inhibit the "short rent" calls the Beamer and Mercedes LL's will be getting 馃槑
- Investor 路 FL 路 Member since 2017 路 266 posts 路 220 votes6y
@Scott Mac
Agree with you. I dont think this tacking on two past months onto rent payments will play out how some landlords here think it will. Im not going to freak out until the 5th of next month. Depending on how that plays out Ill see to what extreme I need to address this issue.
I think scrambling to build up adequate reserves for those who dont have it would be a priority right now. Scale back cap ex, trim fat where possible, .
Ive read here to have tenants put rent on credit pcards or tack it on to future rent payments...I dont think that鈥檚 going to play out how they think. No evictions and playing hardball with tenants during a pandemic is bad juju. Hey you owe me 4k soo can you pay me or will you just find another desperate landlord to move into his property negotiating down their requirements of first, last and sd.
Kindness pays my friends.
I personally could not have had a worst month for this to happen to me. 4 units full gutjob. Cap ex a parking lot, Supposed to close on a 12 unit march 31st and 90% vacancy on my properties(usually 98% occupied) due partly to the 4 rehabs.
Annoying but glad I have adequate reserves. I figure I will work with tenants on a case by case basis. From a kindness standpoint wrapped in greed I will most likely be forgiving of any fees, partial payments etc.
More vacancies forced on by raising rents 30% may not be the most financially savvy solution.
There鈥檚 no easy solution unless this whole thing plays out as I expect it to where we鈥檙e in full lockdown for 2 weeks and then its back to business as usual. In that case ill probably discount a portion of rent and go to war with my mtg/insurance companies.
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