Whether you subscribe to a strictly social media stream of news and information, have Fox News on all day long, or have tried to go out to eat lately, you have no doubt heard of the coronavirus (or as the president was endearingly calling it, the “Chinese virus“).
What we see on our phones, laptops, or televisions would lead us to believe that everyone in the country either has the virus, lost their job, or has no food or toilet paper in their house. This, in turn, has caused panic amongst Americans, who crowd into local, and sometimes far away, stores to purchase all the goods they can get their hands on.
There are differing opinions about how to combat the situation, how much money should be allocated to relieving the damage it’s doing, or if it is even real to begin with. But nobody can deny the fact that, at least for a short while, it is here to dominate our lives and the news cycle.
Coronavirus Is Disrupting Everything
No matter what your opinions are, changes are happening around us very rapidly. People are required to adjust many facets of their lives. And we’re not just talking about where you can go out to eat Friday nights.
Many businesses have already closed; more may follow suit. Among those that remain open, many do so remotely. Employers are cutting back some employees’ hours; some workers have lost their jobs and more may in the coming weeks.
For many around the country, shelves in grocery (and other toilet paper-carrying retailers) have been empty for days. As soon as the shelves get stocked, people are there to empty them again.
In the background of all this, the Fed has lowered interest rates to near zero, causing more panic as people cannot agree on if it is a good decision or not. Some think that the move will only cause inflation to spike, further sinking us into a coronavirus-induced depression.
Amid all the noise, I wondered what BiggerPockets members were talking about, so I took to the Forums to find out. I intended to find answers to the questions that were keeping me up at night—but soon realized many questions were keeping others up, as well.
By now, you have undoubtedly heard all of the popular buzz words: social distancing, self-quarantine, and economic depression. All were mentioned plenty in the forums. However, what I noticed very quickly, more so than anything, was that people were generally asking the same questions from different perspectives.
Yes, people were discussing the stock market, but more forum-goers were posting about how (or if) this was all going to affect real estate.
Are home prices going to go up or down?
Do I still need to make repairs?
What’s going to happen with my closing on Wednesday?
Read on for a list of subjects that kept coming up over and over.
Bigger Pockets Forums: Top 14 Questions About Coronavirus—Answered
1. How should we handle tenants who cannot pay?
In reality, most people are still working at this time. Nonetheless, more and more people are losing their jobs as the days pass. We won’t know the exact numbers on how the job market was affected by this for some time, though.
The fact is, many businesses are temporarily closed. Therefore, there is a higher unemployment rate currently than before the outbreak. Knowing this, many rushed to the Forums for advice on putting a plan in if/when tenants can’t pay rent.
Regardless of how you plan for tenants who may be unable to pay rent, remain calm and be patient. We are all working through this together.
2. Should I be giving refunds as a landlord or short-term rental owner?
As landlords, there are all sorts of fees that you may impose during the application process and over the course of a lease. Some of these could include application processing fees, credit/background check fees, or even deposits to hold the home for an approved tenant. Many of these fees just cover business costs; landlords don’t make any money from them.
On the Forums, many expressed concern about how to balance compassion for tenants with ensuring their business stays afloat throughout this difficult time.
Here are a few helpful takeaways I came across when reading through BiggerPockets members’ responses to this predicament.
If you collect a processing fee or non-refundable deposit, and the potential tenant defaults on their end of the contract, you will always be in the right when it comes to keeping said fee. But should landlords allow for some leeway given the coronavirus pandemic?
Some people say to go by the contract no matter what—that’s what has worked for them over their careers.
However, there were others that said they plan to diverge from their contract and make returns. Some of these landlords stated that their businesses had the means to withstand the impact, so they wanted to be extra charitable during these trying times.
Many landlords were concerned that they wouldn’t be able to pay their own bills and didn’t know how to explain that to a tenant asking for a refund.
I suggest reminding these people that you are not making a profit on any fees or security deposits that are collected. These are simply covering the costs incurred to place tenants in rental properties.
Rest assured, the community is behind you when you lean on your contract and hold onto reservation fees.
For those of you out there running short-term rentals (STR), such as Airbnbs, you have probably had many last-minute cancellation requests due to this virus. Many large events, trade shows, and expos have been postponed or called off, causing travelers to back out of their plans, as well.
All of this causes a ripple effect trickling down to investors, especially in markets where property owners count on spikes in bookings due to such events.
If you are managing the STR yourself, you determine your company’s guidelines. But if you use a booking company, you should refer to their policy. (Here’s Airbnb’s as an example.) Across the board, policies do tend to be very similar.
It’s likely the worst of your cancellations are behind you now, as companies have been able to cope using digital tools. But that brings us to our next question.
3. How will this affect rentals near college/universities/hospitals?
Schools and hospitals are amongst the top community amenities and services that can affect your home’s value. It is no wonder that a lot of investors focus their attention on buying rentals in these areas.
For those of you who primarily invest near schools, there isn’t much cause for alarm. Colleges aren’t going to be completely closed as far as learning and teaching are concerned. The education system has become more and more digital as the years pass. Moving coursework to an online format is not nearly as difficult as you might think.
Students will still be required to complete their mandatory coursework. They will still use textbooks and be assigned homework. Professors can even hold live classes over the internet, where students attend lectures much like they would in a typical classroom setting.
These students still need a place to live. They need a place to cook, shower, sleep, and do their schoolwork. Of course, some students will end up moving back in with their parents. But part of the college experience that a lot of kids look forward to is living on their own during these years. Many of these students are living off grants or loans and will still be able to pay rent on time as if nothing strange is going on in the world.
I don’t think that homeowners near hospitals need to be much concerned either. As long as the hospital remains open, there are going to be people who work there and need a place to live. They typically make very good renters, too.
4. How is this going to affect my short-term rentals?
There are many investors who have an entire real estate portfolio (or a portion of it) consisting of short-term rentals. There are vacation rentals, such as cabins in the mountains, beach homes, or homes off the strip in Vegas. There are also short-term rentals that generate the majority of their bookings around conventions, conferences, or expos.
In the short-term, both have been impacted very similarly.
Shows were suspended, events were postponed, and vacations were canceled. The biggest setbacks seem to be behind us. The shock of everything getting canceled at the same time has passed, and the waters are starting to become slightly more clear.
Eventually, people are going to start traveling again—albeit they may be more cautious in terms of germs. We all need a getaway now and then, and many want somewhere other than a hotel to stay. That said, vacation rentals are likely to rebound nicely.
The concern that I have lies in the real estate sector dependent on conferences and conventions to survive. I don’t think that these things are going to go away, but they will almost certainly be scaled back. This will leave a void that may be tough to fill for Airbnb hosts in certain locations.
5. How will this affect housing assistance programs, such as Section 8?
Many believe that this will affect Section 8 landlords the least, assuming that you have screened for tenants well. With the government passing the economic stimulus bill, it is hard to believe that they would stop payments covering the cost of shelter for those in need.
That being said, the government does have a history of doing one thing and pulling the plug on another. As with many of the other questions, this one has a wait-and-see answer.
6. How can I make/schedule repairs?
We have all been hearing about how we need to “self-quarantine” and practice “social distancing.”
You might’ve thought, “No problem. I’ll stay at home and watch ‘Dancing with the Stars’ until this passes.”
But then a tenant called about a maintenance request, leaving you to wonder where you left that hazmat suit you wore on Halloween three years ago.
As a rental property owner, you still need to be concerned about repairs to your home. There are still people, most of whom are paying rent, living in them. Things will still break. So, how do we go about making necessary repairs while staying safe?
Some Forum members suggested only doing major/necessary repairs at the moment to avoid as much social contact as possible. You’ll still want to treat any water leaks or electrical issues with quick concern, for example.
If you decide to go, or choose to hire someone to go, to one of your rentals to make repairs, just be aware of how germs spread. Practice proper handwashing techniques. In between handwashing, do not touch your face, as this is the fastest way for nasty little things to get into your body and make you sick.
It should be said that these practices should be done at all times—not just when there is a new strand of a virus gaining stardom.
7. Are showings going to be affected?
This applies to landlords, real estate agents, flippers, and whoever else might be going to look at a home for one reason or another. Showing a home is an almost necessary part of every real estate transaction.
Many on the Forums expressed fears that you wouldn’t be able to have showings due to people’s fears of contracting coronavirus or due to government stay-at-home orders. This could delay sales or increase the duration of vacancies.
The fact is, as of now, it is up to the discretion of everyone involved on whether or not to have showings. As long as you are practicing proper germ control, maybe you don’t need to cancel. Or maybe live somewhere that your local government advises against this. In that case, maybe you can do a virtual showing.
8. How is the coronavirus affecting real estate agents?
Some have had showings canceled by prospective buyers or sellers. Some Realtors have had closings moved to digital formats, and others have had buyers back out of deals due to economic/market fears. Some agents have decided, for their own safety, that they are going to take time off. But most in the Forums stated that they are proceeding as usual.
A Realtor/investor in the Seattle area, Michael Haas, has seen some of his buyers move dates back a month or so, hoping this starts to clear up a bit. But he still sees houses being bought and sold every day: “Despite all the economic uncertainty, there’s still lots of activity with the low rates in strong markets.”
Speaking of those low rates…
9. Is now a good time to secure financing or refinance a home?
Some investors believe that because the Fed dropped interest rates to zero, we will see even lower interest rates than we have become accustomed to seeing (even though they have been historically low for a while now).
It is a mixed bag on whether interest rates will continue to fall. The Fed rate doesn’t influence mortgage rates as much as other factors.
But many analysts do predict that mortgage rates will drop further in the wake of the Fed’s decision, so if you are looking to get financing—or locked into a high interest rate and thinking about refinancing—now might be the time.
Don’t get too excited, though. Given the current climate, some lenders are being inundated with applications and inquiries. This sudden spike in consumer financing has driven wait times up, as well as rates.
10. How is the loan process going to be affected?
People are losing their jobs, taking salary cuts, or being forced to work fewer hours because of coronavirus. Will this make banks more stringent on their loan requirements?
It sure doesn’t seem like that would be the case—at least not with the information we have so far. Thus far, people are not defaulting on their loans, and the government is working on measures to ensure that people can afford to stay in their homes.
Some were afraid that banks were going to cancel their loans in the midst of the pandemic. Remember, banks want to loan you money. More importantly, though, they want you to repay the loan. Therefore, the only reason they would back out is if they received information that changes your creditworthiness, or ability to repay.
In the wake of the Great Recession, laws were put in place to protect the borrower from getting into a loan they cannot afford. Banks must abide by these to ensure that the loans they approve will have legal protection under the law.
What this means is, if you qualify for a loan according to government standards, then the bank can loan you the money and is protected in case you don’t repay.
So, as long as you don’t panic, go out, and put a really expensive underground bunker on your credit card before your closing, your loan should be approved.
The process of closing on that loan might be changing, though.
11. How am I going to close on my loan?
Due to growing concerns about spreading the virus, many closing companies (attorney or title) countrywide have been forced to stop doing in-person closings out of respect for social distancing measures. Investors have reported that, in certain areas, they are doing closing entirely by mail.
Thankfully, online platforms for this process are becoming more common, as well. Businesses can do video conferencing and electronic signings. Systems like these should allow for most closings to proceed as scheduled.
Long-term and big-picture, this may cause commercial real estate to drop in value or create the need for commercial spaces to be converted into residential.
12. Should I be investing in real estate or buying stock right now?
Unfortunately, this has yet to be determined. Markets are largely unpredictable, so the answer to the above question won’t be revealed for five to 30 years.
We won’t find out the results of the investments we make today until much time has passed. And results will be influenced by so many factors.
There have been stock market crashes before. There just hasn’t been on caused by a media-fueled pandemic. Previously, crashes were economically driven by greed. This one, stemming from a virus, seems different.
It must be emphasized here, that after every crash, many large gains were made by those who stood strong and were buying the whole time. It is when the most people are panicking that the few can prosper (so I am doing my best to be the few).
“We simply attempt to be fearful when everyone else is being greedy, and be greedy when everyone else is being fearful.” —Warren Buffet
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For me, it really boils down to one question: Do you think that the stock markets/individual stocks will be worth more or less in five, 10, 30 years?
If you think more, then you should always be investing and giving your money time to grow. If you think less, then sit on the sidelines until you change your mind.
13. Do I need to do clean differently because of coronavirus?
Should you change how you’re cleaning your rental properties? Should you be deep cleaning between showings?
While it may be necessary to take extra steps cleaning in between tenants than you normally would, in reality, you should be deep cleaning any dwelling that you rent out regardless of the circumstances. There are always flus, colds, bacterias, and viruses present in our world.
In the Forum discussions, there were many differing opinions on how often you should be cleaning, what products to use, etc. According to the CDC, though, follow normal cleaning procedures using mainly soap, water, and disinfectant sprays.
What should be most important is practicing effective germ control in between cleanings. Showing a home? Touring a home? Wear rubber gloves. Consider whether it’s necessary to touch whatever you’re reaching for when walking through the property.
14. So, how is this going to affect real estate?
Reading through all of these Forum posts and responses has only bolstered my position that real estate is an asset class to be in regardless of economic conditions. People are always going to need housing. There are always people needing to sell, and there will always be people looking to buy.
I have very little question in my mind that in the medium- to long-term, real estate is going to be worth more than it is today—maybe even a couple months from now.
I do feel the same way about the stock market as a whole, too. Yes, we are in a sizeable pullback at the moment, and it could continue to pullback. That has—and will continue to create—buying opportunities in companies that are still performing well through this economic kerfuffle.
The move to digital has been slowly happening for years now, and maybe this virus is accelerating how we use digital services in our businesses. Not having closings in person, never going into a bank, and conducting virtual walk-throughs of homes is going to become more common.
This shift leads me to wonder how commercial real estate will fair long-term. Companies will no longer need large office spaces if all their employees work from home. And they may be motivated to keep it that way to save on overhead costs. This could significantly impact the demand for commercial buildings.
One thing that I know for sure is that the investors within the BiggerPockets community will always have each other’s back. We are going to adapt and overcome whatever situations arise.
It has been very rewarding for me to read all of your comments in the Forums. Most of you out there have displayed calm, level-headed, rational thinking that I hope our country will also display.
Despite things seemingly at their worst, investors are actively providing guidance to those seeking advice. There’s a lot of compassion there—people doing their best to help out, even when it means putting investing second. The more we can lean on each other, the better off we will all be—in our investing careers and beyond.
Remember, it is almost never as bad, divided, or hateful out there as your choice of media depicts it to you. Unfortunately, we just are living in a time where “if it bleeds, it leads” in the news.
The human race has been around a long time and survived much worse than this.
Wash your hands, stay home when you can, and be cautious when you’re out. Avoid touching your face, and for the time being, keep your distance from each other. Most importantly, keep a level head.