Newbies and the Pandemic - Why this is a great time to get started

Newbies and the Pandemic - Why this is a great time to start investing

There is no doubt that the road to financial freedom is not a short and easy one. Even if your goal is a bit more modest - i.e. 1 or 2 properties - you'll undoubtedly be headed down winding road. 

The beginning of your journey is probably the scariest part as you're faced with fear, difficult financial decisions, doubt, analysis paralysis, and a competitive market. So why is this a good time to get started? Aren't turbulent times ahead? It is likely that we will be in a completely different market 6-12 months from now but that doesn't mean we can't find opportunities now.

Fear not 

Fear not. This command is given over 300 times in the Bible. Besides that, you've probably read several quotes from philosophers, motivational speakers, and others about how fear impedes action. What we believe can boost us or limit us. 

Of course, I'm not saying to speed past the due diligence phase and just jump into a deal blindly. Keep a healthy level of skepticism if a deal looks 'too good' to be true. Use conservative numbers when analyzing deals so that you're planning for worst-case scenarios. If you're comfortable with those numbers, you will have addressed one of the biggest fear-inducing parts of the process.

Interest rates are still low

If you invested in your first deal 6+ months ago, you've likely thought about refinancing. In fact, when things began to 'slow down' due to the Coronavirus, Mortgage professionals were busier than ever servicing refi clients.

Property owners aren't the only ones capitalizing on these historically low rates. Newer investors are taking advantage as well. In my market, New York City, investors are closing on house-hack and BRRRR deals with rates in the low 3's. A few months ago, those same investors would have had a rate in the high 3's. 

Lets dive a little deeper to see what that means. For a small multi-family deal purchased at $700,000 with an FHA loan - the difference in monthly payment on a multi-family deal  is about $300-400/month and over $115,000 throughout the course of a 30-year loan. For many first-time investors, this difference in monthly payment can make or break a potential deal.

Your competitors are 'waiting things out' 

While many want to hold off until things get 'back to normal', you'll benefit from having less competition. You know who might not want to 'wait' any longer?... Motivated sellers! 

As deals sit on the market longer with less inquiries, offers come in fewer and far between. Sellers who have had their property sitting on the market for months longer than expected will be more motivated than when they initially put it up for sale.

So get out there and submit some offers! In states like New York, offers are not legally binding so you can back out before signing a contract. I don't advocate for lowball offers because I feel they're typically a waste of everyone's time. However, with less serious and qualified potential buyers out there, sellers may be willing to entertain offers they wouldn't have thought twice about before March.

Its easier than ever to find a solid investor-friendly agent

Typically, you can throw a rock out of a window and hit a Realtor in the head. Not all of them are investor-friendly so you'll likely have to sift through 4-5 agents to find the right fit for you. Reason being, the failure rate in Real Estate is extremely high and you don't need much more than a pulse to get a RE license in some states. Roughly 90% of Realtors quit the business within their first 5 years.

The Covid 'slowdown' to hit the RE market has wiped out many of these Realtors.  Most of the active agents in your market right now are likely near that top 10%. Search the members section of BP to get answers to your questions and find the right Real Estate pros in your market. Don't forget to set up keyword alerts so that you can receive notifications once a topic or area of interest in mentioned in one of the forums. Its a great way to stay current and find the deal makers in your area. Lastly, check out the Events tab to find virtual meet-ups where you can network with these folks.

So why wait?

You've got the tools you need, mainly, the BiggerPockets platform and community. Get informed on the rates and terms offered by lenders at this time. Learn more about the market by connecting with an investor friendly Realtor. If you do this and still find that this isn't the right time for you, at least you'll be more prepared for the big move in the near future.