There are things you can do in tough times to rise above stronger and better positioned than ever. You can learn, adapt, and focus on what you can control.
Even in times of uncertainty, sureties remain. While we don’t yet know the breadth of the pandemic’s effects, two things will never change: best business practices and the need for affordable housing. Many real estate investors are keeping up with the tough times because they have incorporated a business model that can win in any market. But if your model isn’t working now, there are things you can do in tough times to rise above stronger and better positioned than ever. You can learn, adapt, and focus on what you can control.
When former medical sales professional Jim Tannehill devised a goal to build a retirement account through real estate deals, he quickly saw the potential for growth and developed a passion for the industry. So, he modified his goal to become a full-time real estate investor, and he reached that goal in 2014. Tannehill and his wife Gina operate JHT Real Estate located in Fishers, Indiana. They specialize in low-income housing properties purchased from tax liens. Tannehill offers perspective on how to position your business—and your mindset—for positivity.
Quality vs. Quantity
A practice Tannehill has used from the beginning is to always analyze each property, not your entire portfolio.
“If any property cannot cover its own expenses without the help of a stronger property, that should be addressed when things are good, when you have the luxury of time. Err on the side of caution. I would rather have a portfolio of top-performing properties even if it means having fewer units,” he said.
That methodology works during tough times like these. Plus, it yields less stress, fewer headaches, and ease of management.
“Know your tenant pool and meet their needs and wants. When assessing properties, I always ask myself if I were in the tenants’ shoes, would I live here five or more years. Then, address the why or why not, and you’ll be in a position of having limited turnover. Turnover prevents seeing a healthy bottom line and substantial cashflow,” Tannehill said.
Adapting to COVID-19
Section 8 housing has been even more reassuring during the pandemic because rent rolls remain consistent. In the Section 8 niche of REI, when a property is ready for lease, the tenant chooses their home and has a voucher for their home of choice. After paperwork is processed, a local Section 8 office schedules inspection. Tannehill said for his business, the biggest impact during the coronavirus crisis has been on new projects because many inspectors are off work right now, so initial inspections are taking longer.
He said scheduling maintenance as expeditiously as possible is a practice you can keep doing. Prioritize urgency while making sure the tenant is comfortable with the health precautions you are taking.
Unexpected crises bring awareness for things we might not have noticed before. You can allow COVID-19 to break your business or you can adopt the mindset of noticing what you can control and what you can do differently, and better.
“This is a reminder to have your house in order at all times. Take lessons, learn from them, but do not get discouraged. This crisis is tough for investors but it’s tough for tenants too,” Tannehill said.
The core need for housing is here to stay. And since real estate investors can fulfill that need, positive opportunities remain. Tannehill recommends having a relationship with your tenants early on and keeping communication constant and positive.
“Most tenants want to work with you, and they’ll be more likely to do so if the communication is there from the beginning.”
Tannehill’s business model is to “always leave plenty of room on the table margin-wise when things are good,” a practice that will take you through bad times as well. While no one can ever predict what will happen, real estate investors can make sure each property has the right fundamentals in place. Focusing on what you can control can help you get through this.