Changing your investing style, not your goals, can lead your business beyond 2020
By early May, most analysts and even many public health experts agreed the American public and the American economy could not take much more of the stay-at-home mandates and mandatory business shutdowns that resulted from COVID-19. The U.S. economy was shrinking at a faster rate than it had since 2008, when the world’s largest economy fell off at an annual rate of 4.8 percent. The government was borrowing trillions of dollars, bailing out entire states, and sinking interest rates to nearly zero. Moody’s chief economist Mark Zandi described the decline as “off the rails” and “unprecedented,” while most economists agreed U.S. business activity and growth would contract by 30 percent more by June.
Things were, indeed, off the rails, and the lasting impact remains to be seen. Nearly 15 percent of Americans say they will never feel comfortable in public again. The nation’s airlines and the entire air travel industry will almost certainly feel like an alien landscape when gates reopen at the nation’s busiest airports. Analysts compare the effects of COVID-19 on the travel and hospitality sectors to that of 9-11.
Things may never go back to “normal,” and that will be true for real estate as well. However, that does not have to be a death knell for your real estate investing business! You have the power to make changes and save your business.
Many real estate investors out there are losing hope. Maybe they fear their tenants will sustain a “rent strike” regardless of whether they have money to pay. Maybe they wonder if their state’s “nonessential worker” designations will continue to stall their flips and even their new construction and development past the end of summer. Maybe they disbelieve indications that housing prices might withstand this economic meltdown.
You must remain hopeful and, even more importantly, start acting with determination and purpose to keep your real estate investing businesses profitable and productive during and beyond this catastrophic pandemic.
Remember, real estate is the ultimate wealth-generator. It is the ultimate “build-your-own-life” tool. This is not the end for real estate.
Of course, things are going to be different. That is where the benefits of being flexible and creative come into play. As the pandemic continues and crisis– response changes, think about these three important moves that could help keep your real estate businesses profitable:
1. Communication Strategies are Constantly Changing. Communicate Your Changes.
Once, a face-to-face meeting would have been the only way to handle high-dollar business negotiations, but today’s reality necessitates professionals in every arena learn to wheel and deal remotely. This can be good for your business and even decrease your overhead, but it does change things from a practical perspective:
- Cybersecurity is a bigger issue.
- Accountability is harder to maintain and enforce.
- “Standing out” professionally might be difficult if you rely heavily on your personality or in-person networking skills.
Adapt your business practices to today’s reality in a way that makes you stand out professionally. Tell clients, customers, and investors about these changes even if you do not expect them to be particularly interested. Good Success went so far as to send certain clients hard-copy letters as well as digital correspondence to make sure our communications stood out in the immediate wake of many states’ lock-down mandates.
Communicating well and regularly will help a business stand out as reliable, agile, and professional.
2. Constantly Explore New Impact Scenarios & Revise Your Outlooks.
Many investors resist changing their protocols and processes because they feel it makes them appear unpredictable and unreliable. In a time when one of the nation’s most prominent economists is reduced to describing the economy as “off the rails,” it is going to be okay to constantly revisit and revise investment strategies in light of new and emerging trends and data as long as you communicate those changes.
More now than ever, investors cannot afford to have only one “exit” strategy for taking an investment back into its liquid position. Furthermore, no investor can afford to have only one investment strategy per asset. This means a multifamily development should come with multiple scenarios for reacting to various economic shifts. It means the long-term rental strategy must include options for generating cashflow in the event tenants are not able or willing to pay.
Today, there are no best- and worst-case scenarios, only working and nonfunctional ones. Be prepared for everything and, as before, communicate that.
3. Identify Opportunities and Define Plans of Action.
Not every opportunity is a good one just because it is a new one. Be willing to examine every opportunity, but be willing to leave that opportunity if there is not a viable plan of action.
Opportunities are out there, but you must be willing to take them and to leave them!
Recently, a Bloomberg op-ed contributor named Noah Feldman wrote, “It isn’t defeatism to ask what the world will look like if we lose the war we’re fighting [to discover a vaccine for COVID-19]. It’s realism.” Real estate investors who are willing to be realists without being defeatists and remain practical and productive do not have to give up their goals, dreams, and prosperity to this pandemic.
Tom Olson is the founder and president of The Olson Group of real estate companies and the Good Success Mastermind. You can access the latest edition of his book, Contingency Planning for Your Small Business During COVID-19, and learn more about the Good Success Mastermind and 30-Day Good Success Journey at www.GoodSuccess.com.