Posted 2 months ago Colorado Springs & COVID-19 Pandemic This past week has been busy keeping up with normal production and chatting with variety of different investor types to get a broad picture of what each of us are seeing in the real estate market and what we believe the long term impact may be. Here is what we are seeing: From a Market activity standpoint, we are still getting multiple offers on our listings, especially as inventory continues to tighten in Colorado Springs. My Buyers are out shopping but they are limiting which homes they want to see and some bringing gloves for opening doors. Some of my less experienced investors are backing off to "wait and see" while my more experienced investors are still making offers. I saw three offers on a 4-plex that just came back on the market this weekend. Long term buy and hold investors don't care as much about the value of their rentals, as long as the cash flow stays the same, we will make it by just fine. In our Property Management division, we have seen a handful of tenants getting laid off so we are prepping them with as many resources as we can so they may still make their 4/1 rent payment on time. Thankfully it has been fewer than we anticipated but I am sure not all of them have reported their job layoffs yet. We saw two prospective tenants lose their jobs right before signing the lease this past week which is going to add vacancy across the board. We are proactively prepping our landlords for worst case scenarios as we know not all our landlords have been building the reserves we recommend to them at the start. We are also recommending our landlords who have vacant properties decease their marketed rental rates to get ahead of the down trending curve. This strategy worked as we leased about 25% of our active rentals. Talking with the wholesalers, most of the big guys in Colorado Springs are going liquid and ready to buy up deals. They have all stated they are intending to buy at steeper discounts to ensure if the market drops their investments are safe. They are drawing on their HELOC's now in case lines freeze in the future. Having liquidity will help them make it through the slim months but also allow them to purchase while others can't. If lines of credit and HELOC's freeze then they don't expect to have the competition which allows for better buys. I know the fix and flip guys are following this model as well, though, only the more experienced flippers are staying in the game here while the rest "wait and see" again. Talking with lenders, almost all the hard money guys cancelled their loans and are no longer offering new lines of credit. Puts guys like me in a bind when we have closings coming up on great deals in a couple weeks. Several of the hard money guys across the nation closed doors and called it quits this past week too. For all the other lenders out there, all the non QM loans are stalling and we saw contracts fall through because of it. Any in the box loans (FHA, VA, Conventional) are still moving forward but appraisals are bottlenecking as appraisers are shutting their doors till this passes over refusing to enter properties. 30 day closings maybe become 45-60 day closings for a bit. Refinances are very hard between low interest rates causing increased demand and fewer appraisers, they are being put to the way side right now so lenders can focus on the purchases. While I haven't seen this happen yet, I did have a couple lenders let me know I need to warn my FHA DPA (Down Payment Assistance) borrowers that these loans may get cancelled next week. As for my own portfolio, I am prepared to get kicked in the butt with my buy and hold properties. Thankfully, I have reserves to eat it for a bit as a worst case scenario. The last thing I want is to let a good tenant go and have a vacancy in a market where I believe we will see high vacancy. I personally like the C class investments so I expect things to work themselves out just fine and possibly have increased demand as tenants look for more affordable housing options. I would prefer to setup payment plans than to pay for turnover costs and vacancy plus there is the risk of the tenant quality of a new tenant when I know I already have a good tenant who fell on hard times. As for the future - all speculation here. I am eagerly awaiting to see if this $1 Trillion stimulus package gets approved. Part of me says I don't want to see it as it's going to weaken the power of the dollar globally over the long run. Another part of me wants it as I would expect tremendous inflation over the next ten years. I can afford the cost of milk, bread, and gas to double if it means my rental rates due the same. Long term buy and hold purchase prices are locked in for life when you close on the property, therefore outside of taxes and insurance, my mortgage is the same. As rents go up over time, my investments only getting better and my expendable cash flow increases. My personal recommendation is to keep buying despite the Sellers market. I don't foresee prices getting any better over the long run. I talk to new investors every week who all wished they were buying in 2008, 2009, and 2010. Hindsight is 20/20 except this time we have past experience to tell us what the future is likely to hold since we saw stimulus packages in last housing crash. These packages will help keep the economy going and tenants staying in their homes for the most part. I expect to be having the same conversation with investors in 2030 that said they wish they were buying in 2020 and 2021.