The coronavirus scare is already affecting the real estate market.
Low interest rates attract motivated buyers because their buyer power is up. The demand is high because of low inventory. So if you have listings, you’ll make money because you’ll still have motivated buyers.
Target motivated and distressed sellers because they’re the moving part that transcends all economies. People losing their jobs become distressed sellers who need your help getting their home sold and getting money in their pocket. Because of the high demand, in the short term, there will be a lot of deals happening as long as you have listings
For investors, there’s never a bad time to buy property as long as there’s free cash flow after debt service. However, most investors are looking to buy when prices go down, because this is when rent is more stable. But price drops don’t happen overnight, so the key is to build a relationship & maintain Top-Of-Mind Awareness with investors, so when it's time to buy, you’ll be there to help them.
Nobody knows for sure how long this will last. How it affects your personal economy depends on you.
Step up, get strong, commit that you’ll work harder with eyes of hope and confidence, not of fear.
Well, this is not a fun video to make. How will the Coronavirus affect the real estate market?
Hi there. My name is Kevin Ward, the founder of YesMasters Real Estate Success Training, helping you get more YES and more successes in your business and in your life. And yes, even when there is a global pandemic called Coronavirus.
In this video, I'm going to talk about how will Coronavirus affect the real estate market. I'm really going to break it down into four key questions.
Number one, how will it affect the market? Number two, how quickly will it affect the real estate market? Number three, how long will it last? And number four, how badly will it affect the real estate market? So, all four of them are different questions and all four have different answers.
Now the first one I'm going to answer is how quickly. How quickly is it going to affect the real estate market? Well, the answer is fast. How quickly? Immediately. In fact, there is a very good probability if you're a real estate agent and you're doing real estate right now, that it has already affected your economy because if you've had one client, if you've had one buyer decide I'm not going to buy right now, if we had one seller decide I'm not going to close on my deal right now, if you've had one investor back out and say, I'm not going to close on this deal because I don't know what's going to happen next with the market, then your economy my friend has already been affected. So the impact is immediate because people are afraid, and when people are afraid, they freeze and they tend not to do stuff.
So there are things that are happening that are up and down, all over the place. But the answer to the question how quickly is this going to impact us, how quickly is it going to impact the real estate market? It is going to impact the real estate market immediately. Now that's the second question but I answered it first because I think it's important and imperative that you understand that this is an urgent conversation and you've got to take action right away in terms of what do you do about it, which I'll talk about in a minute.
The second question then is how is it going to affect the real estate market? Well, first with buyers. With buyers, how it's going to affect them is one is a positive, low interest rates. We've got record low interest rates, which is a benefit obviously for motivated buyers because they're going to be able to, their buying power has just gone up. It can also affect the real estate market for them because if buyers get scared, scared buyers, then there's going to be less buyers. Now, right now we are in a super low inventory in most of the United States markets, super low inventory, and so demand has been high because inventory has been low. Low supply, high demand.
Now, the interest rates dropping has even brought more buyers out of the woodwork. So for right now, here is the name of the game, having listings. if you have listings, you are going to make money because there are still going to be buyers out there wanting to buy, and with market fears happening, they're going to be coming in and thinking they can get better deals with interest rates, a lot of people want to jump on opportunity. All right, so, it's going to happen.
Now, as time goes on, if people start getting afraid that the market is going to collapse or that the real estate market is going to drop, then you're going to have some buyers, they're going to be going like, I'm going to wait because I don't want to buy while prices are still at the top of the market, because at some point, they are going to be at the top of the market. Whether that's right now or still in the future, we do not know, but that is an impact that's going to have.
With sellers, where is your opportunity with sellers? Well, motivation. The one moving part that transcends all markets and all economies is a motivated seller. A motivated seller is money in your pocket. It's money in the bank. Now, I don't mean we're taking advantage of motivated sellers, but I'm saying is they are people that you can help because they are moving and they need to sell their house.
So the target right now, the person to be paying attention to and looking for is have your eyes open for motivated sellers and especially distressed sellers because whenever things start looking bad in an economy, and right now, if somebody loses their job because right now, businesses are shutting down, businesses are pulling back, businesses are contracting, then cash flow immediately gets tight and companies start cutting costs. Part of those costs are going to be salaries. Part of those costs are going to be jobs.
And again, whether this is a long-term thing or a short-term thing, we'll talk about in a second about how long is it going to last. But the reality is whenever somebody loses their job or gets a pay cut, if they're tight on their house payment, they all of a sudden become a distressed seller. Those are people that need your help, not for you to take advantage of them, but for you to help them get their home sold and get the most money they can in their pocket.
And right now, when you can find a motivated seller, there's going to be I believe plenty of motivated buyers out there to make this happen at least in the short run because there's been so much pent up demand in so many of the markets with buyers not being able to find inventory that people are going to be able to, something that's going to break loose, in the short game, the short term, there's going to be a lot of deals going to be able to happen as long as you've got listings, as long as you have sellers. So, you've got to do that.
Investors, what about investors? How is it going to affect investors? Well, investors like to buy low. Well right now, we are high and buyers have been buying high. So if you've got an investor that's been looking at buying in the past, like recently, they've been buying high. What is the key to working with investors and making it work with investors?
Well, rehabbers right now is probably not a good time for somebody to be buying a house speculating they can rehab it and then sell it for more because we don't know what's going to happen next. So if you've been working with rehabbers, you're about to lose some business very likely because they're probably going to stop buying fixers. And if they are, they're going to be much more conservative. So, you've got to get really aggressive at finding properties that they can get great deals so that there is some margin and that they are safe. But even then, it's going to be, that becomes even more highly speculative. So that's rehabbers.
Now investors are people that buy and hold for cashflow. If you've got somebody who wants to buy and hold for cashflow, there's really never a bad time to buy a property as long as it cash flows. In other words, after they put their down payment and so forth, if free cash flow after all expenses, principal, interest, taxes, insurance, maintenance, lost reserve, marketing, all that kind of stuff, and debt service, if you've got free cash flow after debt service, then any investments are good investment at any time, because when the market does eventually turn, whether that's in the near future or the distant future, when the market turns and properties prices go down, the economy gets bad, rent does not typically follow the market.
Rents don't go down. In fact, in 2007, 2008, 2009, in a lot of markets, while property prices plummeted, rents actually held their own and then actually started increasing. Why? Because people were losing their houses, they couldn't buy so they were forced to rent. So the demand for rentals went up. So, rent tends to stay more stable in an economic downturn. So if you've got an investor and they're buying a good investment property that's got good cashflow, good cashflow, that is a safer place to be. Now what they do also want to have is they want to have margin. You want to make sure that you help them have two or more market, two or more extra strategies.
One extra strategy is rent it, that's one way of cashflowing it. And then another extra strategy is selling it. That's just the two simple ways of, I got to have two ways that this is a win for me. One is if I keep it, I make money, and two, if I sell it, I can get out of it and not lose my shirt. Somebody going in with no money down and they're leveraged up to the hilt, probably not a good time to be doing that with investors.
So how's it affecting it? Investors are going to be more cautious, and if they are looking to buy when the market is down, so here's something to think about, if they're looking at buying when the market is down, when prices drop, price drops do not happen overnight. So even if the economy were to truly go into a recession, and that's one of the questions is, is this it? Is this the entering of the recession? We don't know yet. It's too soon to tell. I'll talk about a couple of scenarios for that in a second.
But if it does, housing prices don't drop as fast as the stock market does. They tend to drop slow. So if somebody's wanting to buy low, it may not be time to buy. If you want to buy at the bottom of the market, that maybe, even if we're entering a recession now, which again, I don't know, but if we are entering a recession, it still maybe two or three or four years before prices actually bottom in the real estate market. This is not something that happens overnight.
So two months from now, like man, now's the time to buy. But if they are getting cashflow, then they can buy now and they're in good shape. But you got to be ready to work with investors for the long game, not just the short game because some of them are going to be looking and going like, I'm going to wait because I've got money, I got time and I'm waiting for the market to bottom and I'm going to buy a property for 50 cents on the dollar or whatever it turns out to be. I don't know if it's going to be that. But whatever it is, they will wait and they're patient and that's their game.
If that is, what do you have? You have a non-motivated buyer right now so you got to just build a relationship, maintain credibility with them and keep top of mind awareness with them so that when it is that time to buy, they're using you. And you've got to get educated. If you are not educated in working with investors, right now is the time that you got to start educating yourself on working with investors and potentially becoming an investor, especially if you have money.
That is how it's going to affect the, how Coronavirus could affect the real estate market. How long is this going to last? How long is it going to affect the real estate market? Well, we don't know. There are a lot of different ways this could go. Now, it ain't going to go away tomorrow, but it could go, in two months, things could be totally back level again, back to normal. May not be completely recovered, but the point is the spread of the Coronavirus and all of that, we don't know what's going to happen when hot weather gets here because the flu has a season, right? Flus, colds have a season. Why? Because the flu virus does not like hot weather.
Well, hopefully, the Coronavirus hates hot weather and it disappears. That could potentially happen. We don't know yet because this is a new strain, COVID-19. People aren't, they don't know what it is, they don't know what it's going to do. So how is it going to react? So how is this going to, is it going to continue to spread? Is this going to become a major pandemic that has massive repercussions? Six months from now, it is still spreading and still we're trying to figure it out and how to control it. Or is it going to be something that one or two months from now is like, they're saying in China it's already, the number of cases is going down so it seems like they may be getting a handle on it. So it could be short-lived and we could recover and everything's back because the fundamentals of the economy have still been good. And it could be something that kind of comes and goes quickly and not take us into a significant long-term recession.
But it could, because again, we don't know how long that's going to last and there is always going to be a domino effect. The domino effect is right now, markets are plunging, people are losing money right now. Small businesses, people aren't shopping, people aren't doing things that they were doing before. So some small businesses, they don't have, they can't weather the storm for six months, much less two years. They go out of business. That now has a trickle effect. The three employees that they had now are unemployed. That person, they're losing their house. If the economy turns back in three months and after they've lost their house or the month after they've lost your house, it doesn't help them. So there's long-term repercussions.
So everything that happens can have a cascade effect. So how long is this going to last? Well, I think the bigger question is how long is it going to continue to push things down, because however long it takes to push things down, whenever things start leveling out, there's still going to be collateral damage of the cascade effect of a market and stability of the fears and all of that kind of stuff. And then the final thing is how badly is the Coronavirus going to affect the economy and the real estate market? How bad is this going to get?
I'm going to give you two answers. Number one, I don't know. How bad is it going to affect the economy at large has a lot to do with how long it lasts because the longer it lasts, the worse it gets because people are afraid and all of that. How badly, the second answer to that is how badly is it going to affect you? And that my friend is a real question. How badly is the Coronavirus going to affect your economy? How's it going to affect your personal real estate market? And that my friend depends on you.
I was sharing with my coaching members earlier today the part of the poem by Rudyard Kipling If. And the poem begins, "If you can keep your head when all about you are losing theirs." And that's how that poem begins, the poem If. And then it ends at the beginning, that if you can do that, the earth is yours and everything in it. Meaning, if you can keep your head when everyone about them is losing theirs, and then it goes on about a lot of different ifs. But if you can do that, bottom line, is if you can keep your head when all about you are losing theirs, you're going to win.
And so, how badly is this going to affect your economy? It may be a positive for you, if you're prepared for it, if you are trained for it, that's what I'm doing with my coaching members and what I'm going to be training all of the people that are working with me is how do you crush it in an economy where many people are going to be crushed, because in the last economic downturn, it hit us, very, very few of us were ready for that. I wasn't ready for that, I had never been punched in the gut by a bad economy, by an economic or housing downturn. It never hit me. I wasn't prepared for it. It crushed us, then it crushed so many people.
And today there's going to be a lot of people that aren't ready for it. If you've been in real estate less than 10 years, you don't know what it's like to get punched in the gut by a real estate downturn. Well, get ready. Now, is it going to happen right now or not? I don't know. But the key is for you to make the commitment that I will keep my head, I am not going to shrink back. I'm not going to curl up in a ball in the corner and whimper and whine and hope for it to go away.
You got to step up, you've got to get strong, you've got to make a decision that you're going to be committed, that you're going to work harder than you've ever worked. You're going to learn. You've got to keep training, keep learning, keep growing and keep looking for opportunities and have your eyes open for opportunities and eyes of hope and eyes of confidence, not eyes of fear, because if you give into fear, it's going to be a tough road to hoe. But if you move forward with courage and say, this is the time that I am going to expand and grow my business, not a time to shrink back and go into survival mode, then you've got a chance.
So, stay tuned. I'm going to be coming on with videos like this to help you, to train you. If you are serious about it, go to yesmasters.com and get some of my stuff. Look at coaching opportunities. We're going to be announcing a lot of new stuff and initiatives coming out to help agents. Whatever happens next with coronavirus and the economy and the housing market, we're here to help you. Make sure you give the video a thumbs up if you like it. Subscribe, comment, post your comments, questions below. I'll be on there , answering those and it'll also help me know what videos I need to bring for you next. In the meantime, play to win and always expect yes.