The market is shot... Now what? In the first installment of our Reflections on the Real Estate Market blog series, we established that there most definitely have been significant changes to the real estate ecosystem. With a particular emphasis on dissecting debt, since it plays such a key role in buying and selling.
But now, what are you supposed to do with that info? How can it translate into where you are in your own career as a budding real estate investor? Let’s explore.
If you’re ready - there will be opportunity.
There will be deals. Enough time has passed now to conclude there’s no way any Federal bailout will cover the full extent of the damage. Investors and regular people alike, who were overzealous in what they could afford, will in many cases need to liquidate what they own to preserve their cash. As we covered before, it won’t be easy to secure loans from the banks right now - but those that are prepared for this downturn will get loans, and will close on deals of a lifetime.
What does it mean to be prepared? Well, there’s a high bar. You either have a chunk of cash saved up or access to cash, already own property and are less risky in the eyes of a bank, are a big earner that’s largely unaffected in this lockdown, and/or have great credit. If you have any combination of the above going for you and pair it with some effort, you should be able to spot and close on deals at a fraction of their actual value over the next 12-24 months.
Congratulations. It’s time to assemble, get to scale, and seize the moment.
If you’re not in the above boat, it’s not the end of the world. You either didn’t put yourself in position or you got knocked out of position. Happens. Sometimes you land on “Go” and collect $200, other times you land on “Go Directly to Jail. Do Not Pass Go, Do Not Collect $200.” Timing is a big part of this game, but self awareness is an even bigger variable.
Can you grill your own weak-points, admit to yourself that you’re not ready to seize this particular downturn, and resolve to get ready for the next?
I’ve recently made my cell-phone number available so people can text me: 917-540-5619. (for real… if you’re reading this, try it.) One key thing I’ve noticed is the amount of times I get asked: “Hey, I really want to start investing in real estate but don’t know where to start?” My answer to that…
Until you know all the terminology cold - you’re not ready.
Before I bought any asset, I spent 12-18 months purely getting ready. Early on, I remember I tried pitching someone to invest with me but failed miserably because I didn’t really know what I was selling. I had to get real with myself and commit to learning everything about my market, the investment terms that were foreign to me, how to even pick a market, and what my investment strategy would be.
What’s the formula for a cap rate? What’s NOI mean? What’s the average rent in the market you’re looking to buy? How did that market perform the last time there was a recession? What’s the economic make-up of the market you’re investing in? Have you spoken to brokers in the area? Gotten to know lenders? Other local landlords?
The answers to the questions above are 100% free to answer. It will take effort, fumbling around on blogs and forums, being comfortable with sounding dumb for a little while as you learn the terms, and dealing with the frustration that comes with being new to something.
However, those that commit now in this market recession to level up, get sharp, and get their credit right - will be the ones in position to make big moves next time there’s a shake-up in the market. And coincidentally, they might be the same ones landing on “Go”, collecting $200, and buying up houses on Boardwalk.
Now go out there and execute on whichever of the two boats you're in.
PS. Digging these? Text me directly at 917-540-5619 and lmk what you liked the most of if you have any questions. :)