Nothing we have ever experienced has affected the real estate industry the way the coronavirus will. Along with the challenges we face in our daily lives will come opportunities never before imagined. Successful real estate investors are staying in tune with the markets and making preparations for their next real estate deal. The greatest opportunities will come in the areas of short sales and foreclosures. The real estate investor who maps out a strategy for participating in the emerging real estate dynamic will realize unprecedented profits in the years ahead.We learned from challenges presented during the economic upheaval of 2008 that with these challenges comes opportunity for those investors who are prepared to elevate their real estate portfolios to higher than imagined levels. We saw this happen a decade ago where homeowners and banks made monumental compromises in order to move housing inventory. The opportunity in front of us now is much different from that one. The earlier situation was brought on in large part because real estate values had surged so quickly in certain markets that a bubble formed. When that bubble burst, holding times for real estate increased substantially; home values declined in most parts of the country and plummeted in others. The markets that declined the most were those where prices had run up the most and the fastest. Miami was one of those markets. That oversupply of housing took time to correct. Successful real estate investors developed strategies that prepared them to take advantage of the excess housing supply. The market eventually stabilized, values began to rise at a slower pace than before, and supply and demand found equilibrium. Just when we were on a steady path of increasing home values, the coronavirus came along and gave us new challenges. When people are told to stay home, payrolls will contract. Uncertainty about future paychecks will keep the buyers out of the market and place pressure on homeowners as they struggle to make rent and mortgage payments. Going forward, a pattern of underemployment will emerge making homeownership harder to obtain and harder to hold on to. Loan defaults will eventually rise and there will be an abundance of distressed housing sales. Across the board, we anticipate that housing prices will decline for the unforeseen future. A two trillion-dollar stimulus package recently passed by Congress, so the likelihood of a protracted recession in housing is not a certainty. Recent moves by the federal government and mortgage lenders across the country to grant forbearance for up to one year on mortgage payments for homeowners affected by the coronavirus will slow down the pace of loan defaults temporarily. The federal government is writing the rules for federally sponsored mortgage programs which account for roughly half the outstanding mortgages in the country. The half over which the feds have no control will not receive the same protection. Waiting for foreclosures to be completed will require more patience in the short run, but eventually the courts will reopen and continue their processing. At the same time the foreclosure.com website is continually generating new opportunities in the live market of foreclosures and short sales. As a real estate investor there are steps that can be taken right now to prepare for the opportunities that will come. This is a time when real estate investors can take stock of their strategies for real estate investing and accumulate the information needed to be successful going forward. Use this time to research properties and prepare yourself for when that happens.
- Think about where you want to be when the dust settles. Will you be buying properties as fixer-uppers? Will you have a hold and rent strategy, or will you want to be a property flipper? Study the neighborhoods that interest you and the type of property, single-family, townhouse, or condo? Urban, suburban, or rural?
- Make a plan that spells out how you will approach sellers and real estate agents. Will you be in a position with cash to make on-the-spot choices and promise a speedy closing? Being prepared to move quickly will help you stand out from your competition.
- Get your financing secured ahead of time. By being pre-qualified you can make cash offers, which are far more attractive to sellers than offers contingent upon financing, and may result in a price negotiation advantage.
- Once you have decided on a location, and have selected a real estate target that meets your criteria, it’s time to refine your numbers. How much will out of pocket expenses be? After all the inspections have been performed, how much money will you have to spend to get the property in the condition you want it? Decide on potential renovations and get cost estimates from contractors and specialists.