Act Now or Wait? IF Under Contract - Close, or Back Out?
Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votesAct Now or Wait? IF Under Contract - Close, or Back Out?
Most Popular Reply
Specialist · Member since 2019 · 137 posts · 125 votes
6yAll the investors I've talked to fall into two camps, those who were not stable but trying to gain stability through real estate and those who were stable and wanting to grow. The ones who are stable are seeing the opportunity in this, both from a foreclosure standpoint in being able to snap up properties and those who realize that everyone needs a home and there will be stimulus and with global warming, heat which scientifically is shown at 86 degrees to inactivate the virus on surfaces, making it much harder to pass. Already today, Italy just had a 103 year old woman recover with treatment. If we just chill now this will pass but the opportunities will abound.
Investors who are less economically stable are worried, but I don't think they should be. Historically, in times of turmoil this has been when many people rose up to make their fortunes. Thankfully, we have unbelievable technology and the ability for even entertainers to work remotely. Not being glib, but having helped orgs scale for a decade using totally remote workforces, this is not that big of a deal. It's a change to the status quo and personally I feel it couldn't come at a better time. It's better for the planet to have as many people as possible work from home and it's better for orgs to go through this - as many orgs are stuck in dinosaur business models with outdated management styles that should be left in the dust.
I'd point to the overwhelming opportunities people will see. Just today I spoke to several entrepreneurs, one a boutique hotel sales consultant. I said "Call every client that booked a meeting and tell them their conference isn't canceled. Research Online Summit providers, get a quote and then provide that conference virtually but you be the point person & jut sell it. Marketers have virtual summits all the time that are huge hits, just get the right partners and call everyone with a new plan." I told a girl annoyed that she had just booked a great gig, she's a folksy guitar player / singer, to sign up for Patreon, do eVites and then have people pay to watch her perform on video and chat with her fans - guess what - her list responded positively on her Insta and now she can do something, whole venues need to think about this. Every waiter / waitress can now see about being a delivery driver or helping - it's temporary but really, we can't shut down the economy. We can use tech to help us.
Let your investors know that now is the time to be bold, be brave and be confident. They are the ones along with these other people thinking outside the box that will help save the economy from totally tanking.
We're Americans after all. Being innovative and spitting in the face of adversity, conquering it and managing to do even better is in our DNA and we need to reclaim our individual greatness instead of the negativity that gets poured on us daily from the media. I'd double down on confidence and do what you can (as I am) to help them make the wisest choice they can so they have the best chance of success and if you can help them avoid a bad deal - then, of course, do it because we're all in this together.
41 Replies
- Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes6y
@Scott Trench I have said this in the past few hours but we need to stay the course on good and great deals. Don't shy away from anything negative. Rates are low, people need places to live. Keep on chugging...unless the deal was on the fence. People may lose their job, people may be shocked...but jobs will be made. Foreclosure on MF properties are unlikely with the current stimulous package - at least that is my hope.
- Rental Property Investor · Maryville, TN · Member since 2009 · 529 posts · 414 votes6y
Forget the viral impact, the macro economic story is MUCH bigger right now. Serious issues are working against us just snapping back to normal. If things don't stabilize quickly, we might be looking at a whole new world starting this year.
NY FED SAYS IT WILL OFFER $1 TRILLION IN OVERNIGHT REPO EVERY DAY THIS WEEK!Can any one comment on this headline?
- 6yJoseph CacciapagliaBusiness MemberLender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
If you're a buyer of real estate long term, there is no reason to believe that you'll necessarily find a better deal than the one you have under contract today. Most of the recent recessions did not come with a dip in real estate prices overall. Of course each market is different, but on average prices were flat or rose in the most of the recent recessions. There is no way to be sure what impact this next recession will have on real estate. Look at what happened after the dot com bust.
The 2008 recession is one of the exceptions, and the one that most people remember, but it was tied directly to the mortgage market. Even then, deals didn't just pop up immediately. There was a long period of adjustment (at least in the market I was in), before most sellers accepted the new pricing. I wouldn't expect to back out of a contract today, and be able to find a significantly better deal anytime soon.
I have 2 clients in contracts at the moment, and they're both choosing to move forward. They worked very hard making these deals, and don't expect to find something better tomorrow. Of course, I have the luxury of having mostly well capitalized clients, who are in this game for the long term. If you're putting your deals together with shoe string and glue, it might be better to wait and see.
- 6ySebastian MarroquinPro MemberReal Estate Agent · Pasadena, CA · Member since 2015 · 476 posts · 263 votes
Go back to why you got into escrow in the first place? (was this a deal that had positive cash flow- after all overhead was considered?)
1. What was the plan for the home: keep long term? Flip?
2. How long will the renovation process be (if flipping)? or to get rent ready?
This market will not be like 2008 and it will rebound. Timing the market is never good and a percentage of sellers on the market will panic and accept lower offers (probably fixers, FSBO, sellers with bad agents or rookie agents).
Pay attention to interest rates and the over all market. We are officially in a shifting market and you have to be prepared to make a move when the time is right.
You should :
1. Choose and understand the market you want to buy in
2. Know the over all numbers for that market (i.e. demand, what homes values are, rental values for 1,2,3,4 bedrooms), what pockets are good, what pockets are average, what are great pockets.
3. have a good lender and know your options for lending products
** The more you know- the faster you will be able to assess a property, and the faster you can snatch it up.
Example: Altadena or Pasadena CA: most fixers are going for above $650k (1000 to 1200 sq ft 2 or 3 bedrooms) in good pockets.
As time goes on: That property will drop to $625k to $600k : If you can get it for $575k or $550k (where rents stay at a good price): then that property starts becoming a great deal.
Do your homework: Pay attention and get ready to take action and don't panic.
- Specialist · Member since 2019 · 137 posts · 125 votes6y
All the investors I've talked to fall into two camps, those who were not stable but trying to gain stability through real estate and those who were stable and wanting to grow. The ones who are stable are seeing the opportunity in this, both from a foreclosure standpoint in being able to snap up properties and those who realize that everyone needs a home and there will be stimulus and with global warming, heat which scientifically is shown at 86 degrees to inactivate the virus on surfaces, making it much harder to pass. Already today, Italy just had a 103 year old woman recover with treatment. If we just chill now this will pass but the opportunities will abound.
Investors who are less economically stable are worried, but I don't think they should be. Historically, in times of turmoil this has been when many people rose up to make their fortunes. Thankfully, we have unbelievable technology and the ability for even entertainers to work remotely. Not being glib, but having helped orgs scale for a decade using totally remote workforces, this is not that big of a deal. It's a change to the status quo and personally I feel it couldn't come at a better time. It's better for the planet to have as many people as possible work from home and it's better for orgs to go through this - as many orgs are stuck in dinosaur business models with outdated management styles that should be left in the dust.
I'd point to the overwhelming opportunities people will see. Just today I spoke to several entrepreneurs, one a boutique hotel sales consultant. I said "Call every client that booked a meeting and tell them their conference isn't canceled. Research Online Summit providers, get a quote and then provide that conference virtually but you be the point person & jut sell it. Marketers have virtual summits all the time that are huge hits, just get the right partners and call everyone with a new plan." I told a girl annoyed that she had just booked a great gig, she's a folksy guitar player / singer, to sign up for Patreon, do eVites and then have people pay to watch her perform on video and chat with her fans - guess what - her list responded positively on her Insta and now she can do something, whole venues need to think about this. Every waiter / waitress can now see about being a delivery driver or helping - it's temporary but really, we can't shut down the economy. We can use tech to help us.
Let your investors know that now is the time to be bold, be brave and be confident. They are the ones along with these other people thinking outside the box that will help save the economy from totally tanking.
We're Americans after all. Being innovative and spitting in the face of adversity, conquering it and managing to do even better is in our DNA and we need to reclaim our individual greatness instead of the negativity that gets poured on us daily from the media. I'd double down on confidence and do what you can (as I am) to help them make the wisest choice they can so they have the best chance of success and if you can help them avoid a bad deal - then, of course, do it because we're all in this together.
- Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes6y
Originally posted by @Jennifer Gligoric:
All the investors I've talked to fall into two camps, those who were not stable but trying to gain stability through real estate and those who were stable and wanting to grow. The ones who are stable are seeing the opportunity in this, both from a foreclosure standpoint in being able to snap up properties and those who realize that everyone needs a home and there will be stimulus and with global warming, heat which scientifically is shown at 86 degrees to inactivate the virus on surfaces, making it much harder to pass. Already today, Italy just had a 103 year old woman recover with treatment. If we just chill now this will pass but the opportunities will abound.
Investors who are less economically stable are worried, but I don't think they should be. Historically, in times of turmoil this has been when many people rose up to make their fortunes. Thankfully, we have unbelievable technology and the ability for even entertainers to work remotely. Not being glib, but having helped orgs scale for a decade using totally remote workforces, this is not that big of a deal. It's a change to the status quo and personally I feel it couldn't come at a better time. It's better for the planet to have as many people as possible work from home and it's better for orgs to go through this - as many orgs are stuck in dinosaur business models with outdated management styles that should be left in the dust.
I'd point to the overwhelming opportunities people will see. Just today I spoke to several entrepreneurs, one a boutique hotel sales consultant. I said "Call every client that booked a meeting and tell them their conference isn't canceled. Research Online Summit providers, get a quote and then provide that conference virtually but you be the point person & jut sell it. Marketers have virtual summits all the time that are huge hits, just get the right partners and call everyone with a new plan." I told a girl annoyed that she had just booked a great gig, she's a folksy guitar player / singer, to sign up for Patreon, do eVites and then have people pay to watch her perform on video and chat with her fans - guess what - her list responded positively on her Insta and now she can do something, whole venues need to think about this. Every waiter / waitress can now see about being a delivery driver or helping - it's temporary but really, we can't shut down the economy. We can use tech to help us.
Let your investors know that now is the time to be bold, be brave and be confident. They are the ones along with these other people thinking outside the box that will help save the economy from totally tanking.
We're Americans after all. Being innovative and spitting in the face of adversity, conquering it and managing to do even better is in our DNA and we need to reclaim our individual greatness instead of the negativity that gets poured on us daily from the media. I'd double down on confidence and do what you can (as I am) to help them make the wisest choice they can so they have the best chance of success and if you can help them avoid a bad deal - then, of course, do it because we're all in this together.
WooWOoo!
(starting the slow clap)
- Specialist · Member since 2019 · 137 posts · 125 votes6y
@Kiera Underwood *gets off her soapbox and high fives you from afar then makes a peace symbol with her fingers theatrically* Lulzzzzz
- Real Estate Agent · Clermont Florida · Member since 2019 · 55 posts · 83 votes6y
Originally posted by @Jennifer Gligoric:
All the investors I've talked to fall into two camps, those who were not stable but trying to gain stability through real estate and those who were stable and wanting to grow. The ones who are stable are seeing the opportunity in this, both from a foreclosure standpoint in being able to snap up properties and those who realize that everyone needs a home and there will be stimulus and with global warming, heat which scientifically is shown at 86 degrees to inactivate the virus on surfaces, making it much harder to pass. Already today, Italy just had a 103 year old woman recover with treatment. If we just chill now this will pass but the opportunities will abound.
Investors who are less economically stable are worried, but I don't think they should be. Historically, in times of turmoil this has been when many people rose up to make their fortunes. Thankfully, we have unbelievable technology and the ability for even entertainers to work remotely. Not being glib, but having helped orgs scale for a decade using totally remote workforces, this is not that big of a deal. It's a change to the status quo and personally I feel it couldn't come at a better time. It's better for the planet to have as many people as possible work from home and it's better for orgs to go through this - as many orgs are stuck in dinosaur business models with outdated management styles that should be left in the dust.
I'd point to the overwhelming opportunities people will see. Just today I spoke to several entrepreneurs, one a boutique hotel sales consultant. I said "Call every client that booked a meeting and tell them their conference isn't canceled. Research Online Summit providers, get a quote and then provide that conference virtually but you be the point person & jut sell it. Marketers have virtual summits all the time that are huge hits, just get the right partners and call everyone with a new plan." I told a girl annoyed that she had just booked a great gig, she's a folksy guitar player / singer, to sign up for Patreon, do eVites and then have people pay to watch her perform on video and chat with her fans - guess what - her list responded positively on her Insta and now she can do something, whole venues need to think about this. Every waiter / waitress can now see about being a delivery driver or helping - it's temporary but really, we can't shut down the economy. We can use tech to help us.
Let your investors know that now is the time to be bold, be brave and be confident. They are the ones along with these other people thinking outside the box that will help save the economy from totally tanking.
We're Americans after all. Being innovative and spitting in the face of adversity, conquering it and managing to do even better is in our DNA and we need to reclaim our individual greatness instead of the negativity that gets poured on us daily from the media. I'd double down on confidence and do what you can (as I am) to help them make the wisest choice they can so they have the best chance of success and if you can help them avoid a bad deal - then, of course, do it because we're all in this together.
This is the greatest think I have read since all this nonsense started! I am pumped up even more now. I am a new investor but grabbed a good deal in Indy and am set to close in 2 weeks. Needs rehab and should BRRRR well. I am a little concerned with material suppliers being able to deliver to the property and how long will the rehab take now. I am keeping the faith and remember why I entered escrow in the first place. I am a father of 3 girls and 1 boy and the oldest is only turning 6 in July. I am 46 and building a portfolio for the future of my kids. Fear will get us nowhere. Stay calculated and determined. We will get through this. Thanks again for inspiring me!!
- Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes6y
We backed out. We would have been way too leveraged with very narrow margins in an extremely volatile market. Our exit is projected to be 69 days from close and anything last that eats into those already narrow margins. We were prepared to walk from a $6000 deposit but the seller opened the door for us to exit with no penalty.
Interested to see what others think. Personally I am still bullish on real estate long term. The next few months will be unpredictable but people will always need a clean and safe place to live. Being stuck in your house for a few weeks will make that more clear than ever.
- Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes6y
@Scott Trench - I was just presented with an opportunity to buy a home run deal today.....I turned it down though. I think the bleeding has only begun. I'd rather play it safe today, so I can invest tomorrow.
- Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes6y
A lot of this is foolhearted thinking. Reason being, this is not something you can throw money at to fix. This just has to take it's time to get through the system. It could be 2 weeks, 2 months, 12 months, or two years. Over this time, can you afford to keep afloat if rents are not coming in? Are your reserves that strong to support your family and your rental property expenses? For you newbies with real jobs and do this on the side, what happens if or when you lose your job. You have no job and your tenants are not paying. What do you do?
If you can back out of contract now without getting financially too hurt, do it. This is uncharted territory. There is zero guarantee that the gov't will back stop investors. ZERO. I even backed out of a deal and kept another one live due to I'd lose my 50k security deposit.
Shore up funds my friends. It will be a bumpy ride. It's better to be safe then sorry. Unless you have a million bucks sitting in the bank, do not take on any unnecessary risks.
If you can get credit lines now, get them. There is no guarantee they will not be pulled, but it's another line you may need to use while available.
- Kellogg, IA · Member since 2019 · 21 posts · 21 votes6y
I think if things go like people are thinking, you're going to find that peoples ability to pay rent is going to drastically be in question in a month or so. While the long time players may be fine, I think 'new' people trying to jump in might be in for a rude awakening since as everyone states, you screw up your first deal and you probably used up most of your resources getting that deal. I'm feeling a bit relieved my recent attempt at a deal went south, because this makes it feel like really bad timing.
At this point no one knows how long this is going to last, but places are already shutting down, going out of business, and schools are being closed the rest of the year. The outlook is not positive. The money being thrown to the market isn't going to help the majority of the country.
- Investor · Houston, TX · Member since 2017 · 34 posts · 29 votes6y
I'm waiting. Even if the deal is great, I would wait. China is in a recession and the United States will be in a recession by the end of March. The best buying opportunity will be 3-6 months from now. I am happy it is a virus causing the recession since it is much easier to recognize we will be in a recession compared to the 08 crisis. Come on, what do you think happens when tourism, consumer spending, and global trade decreases drastically? A recession...
Let's say you bought the property at a 30% discount with repairs. Then a recession occurs, where that property dropped in 40% value. You lost not win even if you bought it at discount now. I would consider waiting since we are weeks away from a United States recession and buy near the middle to end of the recession at steep discount.
- Real Estate Coach · Salt Lake City, UT · Member since 2017 · 272 posts · 414 votes6y
Baseball games are rarely won by dramatic home runs... consistent and frequent base hits win games.
We're under contract for 80 units and are well capitalized. We have no plans to back out. Purchase price is about 10% under the appraised value and we're going to be at 70% LTV. I believe the coronavirus scare is a temporary measure that won't affect long-term prospects. There may be a few rough months, but we're walking in with a $600k repair and reserve budget. We'll make it through the storm. If we have to scale back on renovations, we'll do so. End of the day, keep calm and buy multifamily.
For everyone who says "what if the real estate market goes down" -- I'm going to counter with "what if it doesn't?" What if this is a blip on the radar and we keep growing? Stock market does not affect this asset class as much as the single family or retail... actually, it makes every potential investor lose a little bit of faith in conventional wisdom and want to put their money in real estate. If there's a recession, our vacancy rate will go up, but people that can't afford homes will continue to live in apartments at a higher rate...
Once we're out of the drastic measures to stop the epidemic, we'll get back on track.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes6y
Prices are still high, cap rates are still low, and we are headed into a recession. What is there to discuss?
My purchases right before the 2008 recession ended up fine long-term and cash flowed through the recession but I absolutely would not have bought them if I knew a recession was imminent. Similar properties at high prices will still be there if the economy stabilizes faster than most expect.
The train has already left the station on the economy for 2020 regardless of where the virus goes from here. You don't put the largest economies in the world on lock down without a profound impact.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesFrom my perspective you have to look at the individual investor and their situation.
the pro's are rates are very good so lock in those nice rates now.
ride through the bumps and come out the other side with a stabilized performing asset.
But investors can be more flexible nothing says they have to buy real estate.
I know I personally have about 6 or 7 deals as a seller in contract and for now they are still going forward
closing one today to a hedge fund.. had two yesterday waive their contingencies and go hard and release EM. these 3 are investment properties folks are buying from us.. And i have one owner occ here in Vegas closing on Thursday..
Lots of speculation out there and rightfully so we are in totally uncharted territory. - Real estate investor · Pasadena, MD · Member since 2016 · 165 posts · 258 votes6y
We submitted 3 offers yesterday so we are still buying. We also realize that it will be more of a challenge to find qualified tenants at the moment. We have the reserves to let properties sit vacant if necessary.
- Rental Property Investor · Harrisburg, PA · Member since 2018 · 369 posts · 406 votes6y
"Let your investors know that now is the time to be bold, be brave and be confident. They are the ones along with these other people thinking outside the box that will help save the economy from totally tanking.
We're Americans after all. Being innovative and spitting in the face of adversity, conquering it and managing to do even better is in our DNA and we need to reclaim our individual greatness instead of the negativity that gets poured on us daily from the media. I'd double down on confidence and do what you can (as I am) to help them make the wisest choice they can so they have the best chance of success and if you can help them avoid a bad deal - then, of course, do it because we're all in this together."
@Jennifer Gligoric - F YES! Well stated!
- Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes6y
This question boils down to "Do I panic or not?"
I do not live in fear. Good deals are still good deals, even if they don't look good now. There are a lot of assets and companies that are solid, cash-flow, and value-add right now and they are getting unfairly beaten up. Now is the time to lock in. If you wait until everything "looks safe" the rest of us who are in the trenches will have bought those deals and you'll have the leftovers which will be okay-ish at best.
Values can drop any time, which is why people should never make the success of their deal contingent on appreciation. Appreciation is nice, but not a deal maker. Two months ago there were markets setting records and people here were posting about accepting negative cash flow because "my investment will go up another 30% this year and I'll sell and recover my cash." Today, those people are freaked out that their "discount" has disappeared. They probably weren't ready to be in this biz in the first place. No reserves, unstable income, living on more than they earn, etc. Bad plan. Fix yourself, get on a solid financial footing, THEN invest so you don't have to panic-sell when the stuff hits the fan....because it always does and like this virus you cannot predict when.
Bottom line: buy for value and cash flow. Don't count on irrational exuberance of others to cover you for paying too much. That "investing" philosophy (a.k.a. speculation) has burned people time and again. Learn not to repeat the mistakes of history.
Example: I purchased a 4-plex about 2 weeks ago. New construction costs in my town today are around $110 - $120 per sq ft. I purchased for $55 per sq foot. Post-rehab, I'll have about $70 sq/ft in it, and it will be shiny and nice...ready for another 15-20 years with new roof, new HVAC, new electric, new plumbing, new flooring, etc. You can't build for anywhere close to what I paid to buy & fix.
- Real Estate Agent · Clermont Florida · Member since 2019 · 55 posts · 83 votes6y
I am a newbie investor but I have to disagree with the statement that only a "pro" or someone with a million in liquid should invest right now. That is too broad of a statement. I would agree with this statement instead. Newbie investors should consider the risk, scope of work, neighborhood, exit strategies, and ability to hang on if rent amounts or vacancies are not at the today's current level by the time rehab is complete.
I am under contract on a home that is not very expensive and in a B neighborhood in Indianapolis. Once rehabbed I should not have hardly any capex for the 1st year and I am finding it hard to believe that even if the economy tanks that I could not find at least 1 person to rent it for at least my mortgage payment or even a little less until things looked up. And that scenario is if the real estate market completely tanks. I lived in Atlanta during the dive in 2008 and the rental market exploded because people were jumping out of there homes which were underwater. Homeowners were turning toward rentals far before the foreclosure process even started. My strategy is to buy and hold and not flip. If we operate in fear only we will never take any action. I am honestly a little bit fearful of the worst that can happen but I am also very optimistic of what great things can happen. I am confident that this too shall pass. Even with the DOW tanking 10k points it is still higher than it was in 2016. The government as always will bail out the big businesses which in turn means people will have jobs. I feel thatin a B neighborhood in a great investment city those potential tenants are usually not living paycheck to paycheck. I would be concerned in high crime low income areas and I would be worried if I was working on a 200k house in need of 100k in rehab but I am not. $75k price $30-35k rehab are my numbers on the one I am closing on soon. Quite a difference in my opinion.
I pray that each of you and your families do not suffer from this scare and that you prosper financially in whichever endeavor you take on.
Sincerely,
James
- Rental Property Investor · Collingswood, NJ · Member since 2016 · 282 posts · 116 votes6y
Thank you all for sharing your perspectives. I am a newbie and under contract on my first duplex. I have had so many different thoughts running through my head these past couple days and it has been extremely helpful coming onto BP and seeing all the different guidance from everyone.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
I have used the analogy that some investors are driving the car looking in the rear view mirror. They are missing what is in front of them.
The transmission and death rate is predictable, based on data from other countries. Italy in particular is giving us an idea of what happens once the disease is at community level. The first death in Italy was February 22nd. Two weeks ago Italy had 100 deaths. As of yesterday they hit 2500 deaths. Italy has had 3000 new cases and 350 deaths a DAY for the last three days. That is exponential growth - a concept any investor should understand. We just passed 100 total deaths in the US, so modeling indicates we are two weeks behind Italy. It is likely within one week that the daily US death rate hits 100. I know it seems crazy because we just passed 100 total, so how could we jump to 100 per day? That is how this virus works. Case, case, cluster, cluster, boom. It appears as a few isolated cases, then clusters, then quickly gets out of control.As far as what that means for residential real estate and the stock market? Over the next 1-2 weeks, as this gets worse, we can expect more panic. Real estate deals will slow and days on market will increase. Price decreases will come as sellers will start taking lower offers. There will be less buyers as some people will have trouble qualifying without cash and lost income. That will just keep getting worse over the next couple months. The stock market will see new lows. (I sold all my stocks yesterday). I am bracing for impact and will jump back into the market then.
Too many people are thinking real estate is immune to the greater economy. People forget that real estate lags. After the stock market tumbled in 2008, real estate prices didn't drop in the following days. In many markets the low point hit in 2010 or 2011.
My advice is wait at least two weeks before doing any deals. Not waiting out of fear, but waiting because fear and panic will get worse with others. That means sellers more willing to negotiate. Even in a best case scenarios, this will be worse in two weeks, but at least we will know if our distancing efforts are working to level this off.
Looking forward, the impact here is massive. Too many people are out of work and consumer spending (minus toilet paper) has plunged. There is a ripple effect from that, which will be felt months or years into the future. Some vacation markets like Vegas or Florida are in an especially bad position due to tourism impact. Those are areas to exercise extreme caution right now. Value reduction in some vacation markets is unavoidable, because the impact has already happened. We just have not seen the effect yet.
Commercial real estate will get depressed and there will be buying opportunities. Retailers were already having trouble, so shutting their doors for months is only going to accelerate the shift to online shopping. Companies are letting employees work from home at record numbers. They will realize that the traditional office space is not necessary. After we get through this, the demand for office space will decrease. Families are eating dinner together at home and that could create new habits that could have long term impact on the restaurant industry.
Of course this is a fluid situation. If our numbers trend at a flatter level, it will reduce panic and could stabilize this as we fight through it. Warm weather may reduce the spread. If a treatment proves viable in the coming weeks, it would greatly reduce the impact. As more testing is done in the US, we will understand the disease better. Understanding reduces fear, which reduces volatility. We will get through this, but the game has changed. Failure to see the shift will lead to bad decisions.
- Rental Property Investor · Atlanta, GA · Member since 2015 · 36 posts · 44 votes6y
We were not under contract, but we had an offer prepared for a SFR that we planned to split into a duplex. I disagree with some that if the deal was good before this 'event', it's still good now. We put the offer on hold and we believe the short term value has materially declined. We will still make an offer, but not for a few more weeks until some of the unknowns become knowns. Our offer will certainly be lower than we planned originally. By no means are we sitting out - challenging times always present opportunities.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Joe Splitrock the NV Governor Locked down the state last night .. he was in tears on TV.. SF bay area in Lock down.
I think for those with real estate unless you just have to sell if you cant get your number pull it off the market.
in certain markets we already have critical low inventory.. and any fixer / fixer rental that hits the market even today has multiple offers.. I sold one last week in Portland that we had 7 offers 3 over ask.. and buyer yesterday went hard and release the EM..
I think for those wanting to buy now thats their call for sure.. Just know that your going to use your reserve funds probably on the front end of owning .. just budget for a few months of sitting on the property.. and if its mid west rentals or like @Erik W. latest deal is talking about to just sit on a 70k investment for few months is no big deal if it is a big deal and creates financial stress then i think you as the investor need to rethink as your under capitalized..
this will be a wake up call to cash flow investors that rent is NOT a given right and it can be interrupted so plan for it.. if it never happens fantastic if it does your ready and not in crisis mode..
Anyone trying to exit who bought in the last 2 to 3 years unless they got a smokin deal etc.. are probably not going to get their principal back anyway.. so just hand on.. dont feed the market going down.
As for stocks since I owned Zero stocks I am watching this closely and when I feel we have a bottom i am going to jump in and buy companies I like and some conservative Mutuals to balance .. I watched from the side lines in 08 09 went the market went from 15k to 6k.. had my own problems so could not participate not this time around :)
Lastly as a guest speaker at REIA events I wrote a presentation about 18 months ago called "The Pivot" where I explained in my business we had gone from leverage and max leverage to all cash.. Granted returns were Not the stellar ones you get with leverage. And wouldn't you know it I was thinking as little as 6 weeks ago I guess I messed that up.. I talked about buying land in the path of progress set it and forget it.. I talked about buying timber land etc etc. Not all that popular with the buy and hold crowd but a nice diversification.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
"Everything is fine."
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