Does it make sense to invest in real estate in the midst of a pandemic?
I will start by saying that, until the world stops turning, people will always need a place to live. That sounds a little forward however, that is an irrefutable fact. That one fact alone provides me with enough security to know that real estate is a strong investment. Not to say that you won’t have challenges with a real estate investment during a pandemic however, I believe that all real estate challenges can be solved. Engaging in the world of real estate investing requires one to be resourceful and strategic in their approach.
Let’s take Covid-19 for example, which is what we are experiencing right now. Some would say that there is no way to safely invest in real estate with such uncertainty about the market. I would argue that there is always uncertainty in every market, that is called risk. Any type of investment, be it real estate, the public market, or any other investment strategy, you will encounter risk. A situation like Covid-19 may introduce an increased risk when investing however, I firmly believe that it’s more important to look at the increased opportunity that it brings, then to shy away from investing altogether. The key is to balance the risk with strategic positioning and more due diligence.
When it comes to risk in the real estate arena, there are several positions you may take. If you are uncertain that the market will go up, then make sure you invest in a piece of real estate that has a strong positive cash flow (My preferred strategy anyway), which then removes the requirement for the passive appreciation of the property. Then you might challenge that to say that in the wake of Covid-19, some tenants may not pay their rent. To that I would say, some tenants may not pay their rent under normal circumstances and it’s to your advantage to have contingencies in place to manage the property through tough times. Let’s go one layer deeper and look at one of the basic human needs of certainty.
If I’m a renter in the midst of Covid-19, is the roof over my head any more or less important to me then under normal circumstances? I would argue that one always values having a roof over their head. It would then be normal human behavior to ensure that you are paying your rent, so that you’re certain that you will have a roof over your head. But what if you are simply unable to pay your rent because of a job loss or inability to work. Again I would argue that the roof over your head still remains a basic human need that anyone would prioritize.
In the wake of a pandemic, the problem is more widespread than one person or family and the problem will, therefore, get solved with the assistance of the global community. The fact remains that people will always need to live somewhere. I am associated with many investment groups in my area and several polls have been done to determine whether or not tenants are paying their rent during this pandemic. Across the board, we are seeing that almost all renters are paying their rent. For those few that are unable to pay all of their rent on time, we’re seeing that they are negotiating some alternative options with the landlord and the landlords are stepping up and working with their tenants. We are also seeing the government step up with support programs such as the Canada Emergency Response Benefit (CERB – https://www.canada.ca/en/services/benefits/ei/cerb-application.html), as well as banks and other businesses stepping up with deferral programs to help individuals and families bridge the financial gap and adjust to the new norm. I’m sure that some will argue that there are catches to deferral programs that might be unfair, however, the point that I’m writing to convey is that actions are being taken to help the global community cope, adjust and continue moving in this time of uncertainty.
I have had to evict tenants for multiple reasons, have tenants removed by the police, negotiate with tenants on late rent and I’ve even had to provide tenants with alternative board due to flooding in one of my units. The reality is, life happens and we have to adapt. Tony Robbins once said that “the only problem we really have, is we think that we’re not supposed to have problems”. Well said Tony!
I believe that the Pandemic we are experiencing today is not only presenting challenges, but is also presenting a number of great opportunities to innovate and fundamentally change the way we live as a global community. My advice to anyone looking to strengthen their financial future would be to study how to think like an investor and to then capitalize on opportunities in any market, including a pandemic. Having said that, it is my opinion that we are here in the world to serve, so always remember to learn, earn and then return it to the global community.
Enjoy your own journey, after all, you are the only one that will ever take it! ~Kevin Kuch