Coronavirus (STR - give me piece of mind please friends?)

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Coronavirus (STR - give me piece of mind please friends?)

Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes

So, let me preface this by saying that I think this whole thing is likely a bit overblown and I am by no means a doomsayer the world is ending etc. I currently own two STRs in Pigeon Forge area and @Avery_Carl helped me with finding a lot, developer etc and contacts for a purchase and construction loan to build a new property. Big four bedroom luxury cabin with view, outdoor living area, all the bells and whistles - paying about $750k total, includes everything to be turnkey. Appraisal likely in the 800K+ range. Single close construction loan, 20% down 3.5% Interest only during build with automatic conversion to 3.5% fixed 30 year loan when construction is done.

I won't go into all the details but my family thinks I am "insane", "stupid", Short-sighted" to invest in another property with what is going on in the world with this virus.

I should also add that I do plan to use this as a vacation home for myself as well - and if my STR empire dreams pan out - my eventual personal residence. The mortgage on this place is lower than my mortgage here in CA and the property taxes...forget about it!

What do you guys think? I am kind of thinking that if this thing gets so bad that people stop vacationing in East TN - the world has bigger problems than this...

I more than likely will ignore the family, but wanted to get your guys thoughts and help me with a gut check!

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Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes

It is totally overblown. You have foreign governments giving stats you can't trust.

Just compare with the flu. You can get the stats from the CDC here:

https://www.cdc.gov/flu/about/...

The CDC flu estimates for the 2019-2020 flu season between October 1st 2019 through Feb 15, 2020 looks like this:

29 - 41 million flu illnesses

13 - 19 million flu medical visits

280k-500k flu hospitalizations

16k-41k flu deaths

So that is 16,000 - 41,000 flu deaths in just the USA in 4.5 months.

These stats fluctuate every year depending on how bad the flu strains are in any given year. So the coronavirus doesn't even touch these flu numbers. You don't hear the media freaking out about the flu and just look at those numbers.

All the main stream media seems to do these days is just report a bunch of hype over any given topic that pops up.

I am not letting it bother me at all.

See this reply in the discussion

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Paul Sandhu
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
Ignore those people. It's not their money that you are investing. You have a bigger interest in it than they do.
8 years ago Amazon relocated their distribution facility that was in my town. They moved to a big city. 1600 jobs gone in a town on 9500. Bank foreclosures are common, because people just left town and let the bank have the house. So I just buy bank foreclosures.
If this virus scare turns out to be a false alarm, you might be able to buy properties at a below market price (like me).

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Alan Ford
OP
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
Originally posted by @Paul Sandhu:
Ignore those people. It's not their money that you are investing. You have a bigger interest in it than they do.
8 years ago Amazon relocated their distribution facility that was in my town. They moved to a big city. 1600 jobs gone in a town on 9500. Bank foreclosures are common, because people just left town and let the bank have the house. So I just buy bank foreclosures.
If this virus scare turns out to be a false alarm, you might be able to buy properties at a below market price (like me).

That's actually an interesting point..wonder if I am better off holding on to my $160 grand and using it to buy distressed properties if this thing does go down!

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Paul Sandhu
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
Originally posted by @Alan Ford:
Originally posted by @Paul Sandhu:

That's actually an interesting point..wonder if I am better off holding on to my $160 grand and using it to buy distressed properties if this thing does go down!

Look at the Event Horizon for this virus. It'll probably be gone in 6 months. Find some sheeples that got skeered and are selling their property at fire sale prices. Make sure it's a good market first. Jump on it before someone else does. You aren't the only wolf in the field of sheeple.

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Ken Boone
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
6y
It is totally overblown. You have foreign governments giving stats you can't trust.
Just compare with the flu. You can get the stats from the CDC here:
https://www.cdc.gov/flu/about/...
The CDC flu estimates for the 2019-2020 flu season between October 1st 2019 through Feb 15, 2020 looks like this:
29 - 41 million flu illnesses
13 - 19 million flu medical visits
280k-500k flu hospitalizations
16k-41k flu deaths
So that is 16,000 - 41,000 flu deaths in just the USA in 4.5 months.
These stats fluctuate every year depending on how bad the flu strains are in any given year. So the coronavirus doesn't even touch these flu numbers. You don't hear the media freaking out about the flu and just look at those numbers.
All the main stream media seems to do these days is just report a bunch of hype over any given topic that pops up.
I am not letting it bother me at all.
2 Reply
Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
6y
Hey @Alan Ford. There are 2 streams of thought on the current on the COVID19 virus. One is that it will follow the standard course colds/flus do and be done in a few months. Others feel that it will become a part of the yearly cycle.
Either way, it is more virulent that standard colds. I don't think the response is overblown. I think they are concerned at it is something new and they want to understand it.
It is really hard to say how the disease is progressing. China is not forthcoming with information so the stats can't be trusted. There are not many cases here in the US at the moment.
I think you will be fine. Actually we might see more traffic with people avoiding international travel.
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Alan Ford
OP
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
@Michael Baum I suppose in theory the only way we could really lose is if for whatever reason the government recommends non-essential travel be limited. That would be a pretty massive step to take.
I like the idea of more travel to the area!
The other thing to think about is that my new house won't even be ready until October if I am lucky. Only concern would be if the other two STR properties totally screw the pooch due to the virus and I end up in a bad position relative to those mortgages and the carrying cost of the construction loan. Having said that - I would need to almost have no guests at all for it to be that bad.
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Lauren Kormylo
Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes
6y
The Coronavirus will be just a blip in the grand scheme of things as far as your investment. It sounds like your family thinks this is the end of the world, which is ridiculous. So far the death rate is about 2% of hospitalized patients in China, but there are many more infected who had none or mild symptoms and weren’t hospitalized, so therefore didn’t get counted in the total. China has a lot of air pollution, and that could be contributing to the high death rate, as the virus greatly affects the lungs. We need to be concerned about it, but there is no reason to stop living (and investing).
0 Reply
Jon Crosby
Investor · Roseville, CA · Member since 2016 · 893 posts · 1k+ votes
6y
https://www.youtube.com/watch?v=39A7Tr-H29E
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Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
6y
The media behavior over all of this is simultaneously laughable and reprehensible.

How many people didn’t die from carbon emissions pollution in China since the factories have been shuttered?

4,000 people PER DAY are killed throughout the world in auto accidents. Yet strangely people are STILL DRIVING! Amazing! Where is the media panic?

Come on, people, let’s be real here. You have a better chance of running over a water buffalo on your way into work tomorrow than dying from corona. But pack some bath towels just to be safe.

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Alan Ford
OP
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
@Jon Crosby this was great. Sent straight to my family haha.
1 Reply
Account Closed
Investor · FL · Member since 2016 · 332 posts · 388 votes
6y
@Alan Ford I wouldn't worry. If it does effect tourism you are looking at 90-120 days. Your construction will be completed afterwards. This is why banks like to see 6 months of reserves to weather the storms. I am launching 2 construction projects there in the next 90 days. The way I do calculations is I need my properties to rent for 7 days a month (approx 85 days a year) at normal rates to pay all bills and repairs/capex. After that it is profit. So if it hits the US as long as I am rented 90 days a year I am good.
1 Reply
Alan Ford
OP
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
@Chris Watson good way of looking at it. Thanks .
0 Reply
Kyle H.
Investor · Bryson City, NC · Member since 2013 · 162 posts · 122 votes
6y
@Alan Ford I think the Smoky Mtn region is as insulated a STR area as possible in regards to the virus and economics, I am getting ready to build as well and haven't given it a second thought. I would even venture to say we might see an uptick in numbers as the majority of guests do not have to fly to get here and our small towns probably feel less vulnerable than the theme park or beach areas.
1 Reply
Mark Miles
Rental Property Investor · Philadelphia, PA · Member since 2016 · 543 posts · 716 votes
6y
Originally posted by @Alan Ford:
So, let me preface this by saying that I think this whole thing is likely a bit overblown and I am by no means a doomsayer the world is ending etc. I currently own two STRs in Pigeon Forge area and @Avery_Carl helped me with finding a lot, developer etc and contacts for a purchase and construction loan to build a new property. Big four bedroom luxury cabin with view, outdoor living area, all the bells and whistles - paying about $750k total, includes everything to be turnkey. Appraisal likely in the 800K+ range. Single close construction loan, 20% down 3.5% Interest only during build with automatic conversion to 3.5% fixed 30 year loan when construction is done.

I won't go into all the details but my family thinks I am "insane", "stupid", Short-sighted" to invest in another property with what is going on in the world with this virus.

I should also add that I do plan to use this as a vacation home for myself as well - and if my STR empire dreams pan out - my eventual personal residence. The mortgage on this place is lower than my mortgage here in CA and the property taxes...forget about it!

What do you guys think? I am kind of thinking that if this thing gets so bad that people stop vacationing in East TN - the world has bigger problems than this...

I more than likely will ignore the family, but wanted to get your guys thoughts and help me with a gut check!

The world is freaking out. Absolutely phenomenal time to stockpile your cash and pounce after the market plummets. What market? Stock market, real estate market? Doesn’t really matter, markets are falling, hang onto your cash, and buy cheap after the markets plummet
1 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
6y
Originally posted by @Alan Ford:
What do you guys think? I am kind of thinking that if this thing gets so bad that people stop vacationing in East TN - the world has bigger problems than this...

I more than likely will ignore the family, but wanted to get your guys thoughts and help me with a gut check!

Well, if it gets so bad that people stop vacationing in East TN, I will be in a lot of trouble since this is my backyard 😅 . As others have said, there are a lot of other seriously infectious, more deadly diseases out there so I think it's more a case of take reasonable precautions in life and let it fall where it may.

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Joey Morea
Lender · Tampa, FL · Member since 2018 · 149 posts · 102 votes
6y
I think if your STR is in a drivable vacation town you will be ok maybe even see a bump in activity as people are going to still want to vacation. I actually just had someone check out today and say he canceled his trip to Japan in a couple of months and instead is going to rent my unit again for that trip instead. People are now starting to plan their summer plans as I have seen a big uptick in bookings this past week.
1 Reply
Ryan MoyerBusiness Member
Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 996 posts · 1k+ votes
6y
The comparisons to total flu deaths at the end of flu season against a virus that is just starting to spread are laughably silly, but outside of that this thing isn't the black plague. It has a high death rate for something that spreads so easily, but not a super high death rate overall.

In a worse case scenario we're looking at about half the US infected and 2% of those dying which would be around 3.5 million deaths. Again that's an absolute doomsday worst case scenario that is unlikely. The reality if this thing does hit is that it will be really bad, but in the context of a 30 year real estate investment not a long term issue. In 6 months it will likely be over either way and things will either still be normal or things will be starting to get back to normal.
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Alan Ford
OP
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
Originally posted by @Ryan Moyer:
The comparisons to total flu deaths at the end of flu season against a virus that is just starting to spread are laughably silly, but outside of that this thing isn't the black plague. It has a high death rate for something that spreads so easily, but not a super high death rate overall.

In a worse case scenario we're looking at about half the US infected and 2% of those dying which would be around 3.5 million deaths. Again that's an absolute doomsday worst case scenario that is unlikely. The reality if this thing does hit is that it will be really bad, but in the context of a 30 year real estate investment not a long term issue. In 6 months it will likely be over either way and things will either still be normal or things will be starting to get back to normal.

Unless you cant make the payments and go into foreclosure. Most of us have reserves, but not crazy reserves haha.

0 Reply
Paul Sandhu
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
Originally posted by @Account Closed:
Always best to come in when there's blood in the water. When everyone leaves, you'd be surprised how many deals that they are to be had.

That's exactly what happened in my market. Amazon relocated away their distribution center and another major employer moved their plant to another state. 1800 jobs lost in a town/county of 9k/30k. People left town. Lots of bank foreclosures. Lots of real estate at foreclosure prices. The problem is that there isn't enough demand for people to buy or rent a house to live in long/medium term.
1 Reply
Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
6y
Originally posted by @Ryan Moyer:
The comparisons to total flu deaths at the end of flu season against a virus that is just starting to spread are laughably silly, but outside of that this thing isn't the black plague. It has a high death rate for something that spreads so easily, but not a super high death rate overall.

In a worse case scenario we're looking at about half the US infected and 2% of those dying which would be around 3.5 million deaths. Again that's an absolute doomsday worst case scenario that is unlikely. The reality if this thing does hit is that it will be really bad, but in the context of a 30 year real estate investment not a long term issue. In 6 months it will likely be over either way and things will either still be normal or things will be starting to get back to normal.

I don't see a scenario where the mortality rate in the U.S. is anywhere close to 1 percent, much less 2 percent. Maybe two or three tenths of one percent. Realize that that 2% percentage is in mainland China. China ain't exactly the U.S. in terms of healthcare. Let's look at hip replacement surgery: In the U.S., the mortality rate within 30 days of surgery is .3 percent. That's less than one third of 1 percent. One in 330. In China, the mortality rate within 30 days of surgery is 2.6%. One in 35.

Apples and oranges.
However, facts often have no influence on emotion, and right now the reactions in the media, the markets, and around the world are based purely on emotion.
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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
6y
Every two years the government comes up with some new disease to give the people a reason to stop thinking about real life and the fact that February is depressing. Swine flu, bird flu, Zika, Corona. Give me a break.
Then again I also ran a 1:45 half marathon yesterday while sick. I just don’t have the capacity to be worried about diseases or viruses.
To the OP: I can’t relate to your situation. My wife would never tell me not to buy real estate in fact she’s usually pushing me that I don’t have enough. She also would call me a kook if I was worried about this fake virus. As for my kids they’re too young to talk let alone be involve in business decisions.
Just goes to show you the world is filled will different folks with all different strategies. I’m enjoying the journey.
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Mike Shemp
Rental Property Investor · Stewartsville, NJ · Member since 2016 · 420 posts · 280 votes
6y
There are lots of markets that receive their guests from driving instead of flying. If you have concerns over the virus, you could focus on vacation markets where people drive to them.
0 Reply
Alan Ford
OP
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
Hi all (OP here) - so it's getting pretty crazy out there since I last wrote this post. Oddly enough - so far - my TN STR's are busier than ever. My property manager is actually getting more bookings compared to last year. He's doing some marketing specifically playing up the fact that a cabin in the woods is a pretty safe place to ride out something like this... haha... sad but true.
Still - worried about pulling the trigger on the new loan/property. I know long term it will be more than fine, but I’m worried about a short term situation. I know no one has a crystal ball, but how do we think the vacation rental world will look 6-8 months from now?
I guess even in worst case scenario if every single person in the country got this and 1% of the population passed away, that it still a lot of people left and I would guess a vaccine will come out as well...
Would you all pull the trigger on the new property? There is no question it would have cash flowed nicely under a normal circumstance. Also it was meant to be my vacation home ...
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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
6y
Hey @Alan Ford, I think we will be fine. Especially for a place in the Smokeys. I am in WA State and things are overall normal. People are out and about. I only saw one person wearing a mask (the wrong kind and incorrectly) and I went to 5 stores.
Our gov has prohibited events of 250 or bigger and I think he is going to close all public schools in the 3 affected counties. If we hit a level 4 health crisis, it could mean we would be forced to stay in our homes at all times with exceptions for food runs etc.
Personally I think we are overreacting. If the mortality rates we 50%, then we could justify some crazy actions, but right now it is sitting just under 3% and that is without knowing the full extent of infections.
I wouldn't let this keep you from progressing with your plan. I think things will be just fine in 6-8 months. In fact, if you wait a bit, you might find better financing rates to make the deal even sweeter.
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Alan Ford
OP
Rental Property Investor · Temecula, CA · Member since 2020 · 128 posts · 55 votes
6y
@Michael Baum thanks! Odd on the rates thing, my lender tells me they are going up. I think it has to do with the amount of applications they are getting in lately and refinancing requests maybe.
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