How Coronavirus will affect Real Estate Businesses

Are you curious how the deadly coronavirus will affect real estate? Given that there is no vaccine yet for the virus, there is more impact to come. It is important to prepare and adjust your current business strategy. I’m going to walk you through what actions you should take. This relates to general contractors, agents, and investors. My goal for you is to start thinking of how you can modify your strategy to remain successful in your business.

What is coronavirus?

Coronavirus is an illness that started in Wuhan, China. Like other coronaviruses, it came from animals. Many of those infected either worked or shopped in the Chinese city. The virus can cause pneumonia and in severe cases death.

As of now, there is no vaccine available. Because of this, countries have instilled quarantines. For example, many in China are working from home to avoid contact with the virus. In addition, there are more travel bans. Airlines have canceled flights to china, which impacts global business.

How does the virus impact real estate?

In real estate a major component is purchasing items abroad. China is our major partner for these products. This affects sale, investment, purchase, rental and leasing of residential and commercial properties.

The goods China produces for us includes stoves, washers, building materials, and so many commodities. Not having these materials available on time has a negative impact. This affects real estate transactions, building, development, renovations, repairs, etc. When these items are not available, things slow down and worst case could cause a beginning of a recession.

This impacts flippers & general contractors, real estate agents, and investors. For each of these business lines, I’m going to cover actions to take to remain profitable in your business.

Business Line Deep Dive

House Flippers / General Contractors

A part of a house flipper and general contractor’s responsibility is assessing required building materials that fall within their budget for a project.

The price of building materials could increase if production and shipment from overseas is halted. Along with cost, materials can take a longer time than usual to be shipped which will slow down construction projects.

To manage shipment delays we should use web scraping. For example, if you are a house flipper that uses the same type of shutters for each house, then you have an expected cost and shipment time in mind.

However, if the shipment takes longer this can negatively impact the timeline of your project and increase your costs. By web scraping public data like Home Depot’s web page, you can extract information on expected shipment dates.

You can measure the day to day change. For example, the shutters usually take 5 days to ship. If this number increases to 6 days or more send an alert to your phone to purchase these items ahead of time. This can help manage your project more efficiently.

Agents

If the virus continues to spread it makes sense that more people will stay indoors to avoid exposure. This can hurt real estate agents as a lot of their businesses is face to face. Fewer buyers may be willing to attend open houses which can make sales harder to come by.

If people stay indoors either by choice or forced quarantine, what will they do when they're bored? They'll spend long hours on social media networks like Instagram, Facebook, and YouTube. You know this has been you on a lazy Sunday!

This is the right time to increase your online presence to build your client relationships.

Actions

First, share your market knowledge on which areas in your region are trending upwards in a short video or blog. Post this to your social media pages. This will increase your cred as an expert in your field. People remember why they should come to you when looking to sell or buy a home.

Second, if you use advertising on sites such as Facebook or Snapchat, this may be the time to ramp it up. More viewers means more impressions for your ads. This can help to increase your exposure and future sales.

Lastly, engage in online networking. Did one of your friends just attend a wedding? Great! Ask them for that person’s contact. There is a higher likelihood they’ll be looking to start their new life in a new home. You can reach out directly to the newlyweds to be their lead agent.

Investors

For real estate investors, there is a multitude of issues that can arise from a slowing economy. This can affect the job market and thereby weigh on household formation and affordability. Tenants could stop paying rent and homes can depreciate in value. What can investors do to ensure their strategy remains intact?

Diversify - Don’t put all your eggs in one basket! This means the areas you invest in should be diversified in occupations and income. With the virus, goods and service exporters to China and the travel industry will feel the immediate impact. If the virus continues to spread broader impacts will occur in high-value industries like autos and electronics.

How does this affect investors? If you invest in an area where the majority of the workforce is in one industry, such as Detroit in the 2000s, you’ll be in for a rude awakening when the majority of your tenants are displaced from work and you're left footing the monthly mortgage payments. Make sure your current and future investments are in areas with diversified occupations as a safe-net for economic downturns.

Cash flow - It goes without saying, but make sure you are only investing in properties for cash flow. Meaning your income surpasses your expenses. Don’t invest in properties for appreciation, hoping it’ll be the next “hot spot”.

Distressed properties - These are properties that are sold below market value because the homeowner was unable to keep up with mortgage payments or tax on the property. An example is a foreclosure. Why should you pay more attention to distressed properties now?

Chinese buyers are the largest foreign market of U.S. residential real estate, with a purchasing power of 13.4 billion in April 2018 to March 2019. If the virus continues to negatively impact China's economy some of these foreign investors may have properties that turn distressed. This can be a key opportunity to buy!

Conclusion

The coronavirus will have an impact on the real estate industry. However, do not let this hinder your progress. Instead, adjust your strategy to remain profitable.

Check out the supporting YouTube video here.