Impact of COVID-19 on the U.S. Real Estate Investors
A new RealEstateBees.com survey of over 2,000 active real estate investors found that despite the negative impact on their business caused by the COVID-19, more than 65% are seeing newly emerged opportunities as a result of the pandemic.
The following segmented report provides results of a large scale survey—Impact of the COVID-19 on the U.S. Real Estate Businesses—conducted by the Real Estate Bees, a leading real estate platform for real estate professionals.
The following statistics reflect the situation among the US real estate investing businesses. We reached out to over 2,000 active real estate investors from all the 50 U.S. states as well as Washington D.C. to collect their insight on the impact of the COVID-19 pandemic on the industry in general and their businesses in particular.
The report is divided into the following two parts.
1. Multiple choice questions where the investors had to choose one of the suggested answers to each question:
1.1 Is there a negative impact the pandemic is having on real estate investors?
1.2 Has the pandemic opened any unexpected opportunities for real estate investors?
1.3 How are you adjusting your marketing budget?
2. Open questions that allowed the experts to share their insights on various aspects of the impact of the coronavirus pandemic on the US real estate investors’ businesses:
2.1 What are the specific negative impacts the pandemic is having on real estate investors?
2.2 What unexpected opportunities have the pandemic opened for real estate investors?
2.3 If you knew the impact of this situation on your business in advance, how would you prepare your business to mitigate your losses or even profit from it?
2.4 What marketing channels do you prefer to use during the pandemic over the rest and why?
Is there a negative impact the pandemic is having on real estate investors?
Has the pandemic opened any unexpected opportunities for real estate investors?
How are you adjusting your marketing budget?
Are you transferring your business to a “work from home” basis?
Have you noticed any benefits of transferring your business processes to a “work from home” basis?
Have you noticed any drawbacks of transferring your business to a “work from home” basis?
Will you keep your business processes transferred to a “work from home” basis after the pandemic is over?
What are the specific negative impacts the pandemic is having on real estate investors?
Key takeaways from the real estate investors’ answers:
- Homeowners are hesitant to sell their properties, probably because they prefer to keep their assets in real estate
- rather than the currency during the time of uncertainty.
- Homeowners are reluctant to let buyers in the property for viewings, because of the risk of being contaminated.
- Long-term, real estate prices are expected to go down, which is bad for “buy-and-hold” investors or landlords who will need to sell their property later.
- Landlords are having a hard time with their renters not paying rent.
- Vacation rental owners are enduring losses because the tourism industry has stopped.
- Financing has become far less available to different types of real estate investors.
- Commercial landlords are having losses because of the businesses being stopped for quarantine.
Jeff Copeland, Copeland Morgan LLC
There is no doubt in my mind that we will see a softening in prices, a decrease in volume, and a general downturn in the real estate market. The real questions are how far will it drop, and how long will it last?
Everything in real estate happens on a slower timeline than most segments of the economy because real estate contracts typically have 30 to 90 day timelines. We are still closing transactions now that went under contract before the pandemic blew up in mid-March, so it’s too soon to really feel (or measure) the impact.
Anecdotally, we are seeing some prices drop, and many buyers and sellers putting things on hold. We’ll start to feel that, and see it reflected in prices and other market statistics, in another 30 to 60 days.
Brandon Alfriend, CommonCents of OwnerLand Realty
COVID-19 has caused a significant drop in real estate activity across the board, but has had a greater impact on sellers than buyers. Sellers, for obvious reasons, do not want strangers walking through their homes, and many have opted to pull their homes from the market or refrain from listing in what is usually the peak listing season of the year.
This has further exacerbated the low inventory problem that has been plaguing real estate investors over the past few years, making it more difficult to find good deals. With that said, once things start to go back to normal, I expect a flood of new listings to hit the market, thus reversing the multi-year seller’s market trend.
Uriah Dortch, The Inspiring Investment
Currently in our market of Raleigh, NC we are seeing sellers sitting on the sidelines. Typically, this time of year is very busy for us with sellers making decisions on who to sell their properties to. Currently, sellers are asking questions, getting offers, then saying “thanks, I am going to wait and see what happens”.
We are spending considerable money marketing for sellers and the phones are ringing and the leads are coming in, however the sellers have not been making decisions to sell as they previously would.
DJ Morris, Springbok Realty
Right now, there is very little Covid-19 data to use in the housing market due to so many transactions put on hold, but once the dust settles, the large spike in unemployment and money people lost in the stock market should affect the supply and demand of the housing market.
I expect to start seeing a 15% to 20% downturn in prices by the end of the year. If there is another spike of Covid-19 in the fall, I think you will see up to a 35% drop in home values.
Henry Angeli III, Henry Buys Homes LLC
Many hard money lenders have quit lending, meaning that the ones who are still lending, even private lenders, can rightfully charge higher rates because of the reduced lending options and higher risk they are assuming. This has caused the buying pool for investment properties to shrink, meaning that the remaining buyers can also afford to offer less and still get the deals.
Cody Willmoth, ALL-TEX Home Buyers
When the work from home order was issued, half of our deals we had under contract went south for a multitude of reasons, mainly on the sellers side of the transaction. A few deals we had to put on hold while we secured more capital due to COVID-19 causing our original partners to pull out because of market uncertainty.
Randy Sinda, WeBuyHouses916.com
It’s a scary and confusing time for sellers. The market is showing signs of these changes. You’re starting to see sellers cancel and, at times, withdraw their listings as uncertainty manifests itself in the marketplace.
Frank G Silveria III, Frank Buys Houses
If people want to sell, they still aren’t sure where to go or how to get there because of the uncertainty of what’s next in the world. Therefore, it’s now a process for sellers.
Marc Afzal, Sell Quick California, LLC
Homeowners can stay put as they do not need to pay their mortgage and can stay in their property as lenders work to delay mortgage payments. Additionally, sellers do not have many options to move. Potential market declines are pushing us to offer much lower on offers.
Trevor Augustus, Jax Home Offer
Fear of market downturn has caused many investors to take a wait and see approach instead of buying as much as they were. The lending for investors has become harder to obtain and speculation on if prices will drop makes it tougher for many investors to feel safe making a solid offer.
Cathy McGrail, Keller Williams Home Town Realty
The investors who have purchased in bulk – for example, AirBnB, have rental income. However, on the flip side, investors are buying properties to add to their portfolio and rent. We experienced tornadoes last Memorial Day and there is still a great need for rental properties in our area.
Justin Lee, ABI Investments, LLC
Sellers not wanting to sell and taking a “wait and see” approach means fewer deals.
Tim Hall, Swell Real Estate Investments Inc
Real estate investors are finding it difficult because of the uncertainty surrounding the market. Uncertainty creates unrest and that can lead to panic buying and selling. It can be as little as a roll of toilet paper or as much as a shopping mall.
Also, different sectors of real estate are being hit harder. Landlords of single family dwellings are being hit because their tenants are not paying them. They’ll bounce back once everything opens back up. Owners of multi family units are being harder hit because they have more tenants not paying.
The worst affected sector is and will be the commercial sector—the ones who lease the restaurants, malls and shopping centers. How long can they last in this shut down economy? Not long by all accounts.
This could be the end of shopping as we know it. Everything can be bought online now, it’s more convenient and probably cheaper. As these brick and mortar shops fail, mega corporations such as Amazon will be waiting to scoop up consumers and their money.
What unexpected opportunities has the pandemic opened for real estate investors?
Key takeaways from the real estate investors’ answers:
- Larger national home buying companies (iBuyers) have stopped or reduced operation. This has freed more opportunities for smaller local investors.
- The prices in some of the areas have decreased, giving investors a chance to buy properties cheaper.
- As some local investors have stopped operating because of the uncertainty, others have gotten access to get advantage of lower competition.
- The prices of Facebook and Google ads have decreased.
- A large influx of properties on the market is expected after the period of uncertainty, which will be a chance for investors to buy cheap.
Joe Hartman, Perry Hall Investment Group
I believe this event will be categorized as a black swan event. The timing appears to be correct since they occur every 10-15 years historically and we’ve been on a run for 8 years now and we’re just beginning to see some stabilization over the 18 months.
While the retail market is still pretty strong with people buying and refi’s, there’s access to capital. However, the investor market is and will be shaky going for a bit until this shakes out.
For investors, the access to capital has hurt the most. Many hedge funds and investor friendly funding sources have either run out of money or have increased lending requirements.
Secondly, property values is a huge unknown for many. And this is a very important part of the equation when buying property. I believe these unknowns will be short term challenges for 6-12 months. I’m bullish.
The bright side is that likely it will reset the market. Once the government aid has run out , some property owners will need to sell because of the damage caused. Chances are this could turn into a buyers market after years of being a sellers market. Though inventory is at an all time low in many areas, these owners will have very few options but to sell.
For these reasons, we have another opportunity of a lifetime if you missed out in 2010-2013 to buy low.
Henry Angeli III, Henry Buys Homes LLC
With this pandemic, I’m finding that some sellers still aren’t as motivated to sell and others are, so there is quite a mix there. I think that real estate has a lag time to react to these kinds of market conditions because most retail transactions take weeks to finally close. I think the retail buyer pool will definitely shrink over time as unemployment skyrockets.
At the same time, however, I have noticed that some sellers are waiting to sell, as it seems that they realize the pandemic is only temporary and that our world will eventually continue business as usual.
Hence, the housing inventory is not really noticeably rising and thus, housing prices haven’t really declined. In fact, I had a bidding war over one of my properties during this pandemic!
However, I have seen an increase in houses going “back on market” due to lender financing falling through because of stricter credit requirements for new loan applications.”
Matt Buttner, My Florida Home Buyers
With the iBuyers ceasing their purchasing because of the uncertainty, we’ve seen an increase in sellers contacting us to buy their houses. Many of these sellers do not have the time to wait for a real estate agent to sell their house, so local cash home buyers have become the only solution to their problem.
We’ve also seen the cost of Facebook and Google Ads decrease as many of our competitors have slowed their marketing or stopped marketing completely because of the uncertainty. This has given us the opportunity to double down on our own marketing and grab more market share.
Uriah Dortch, The Inspiring Investment
If you can get a seller actually ready to sell now, then they don’t have a lot of options. They have been unable to get offers from big box buyers and they don’t know if those companies will come back online anytime soon.
Also, the houses we are trying to sell haven’t been moving at the speed we typically see for this time of year. Normally, there is a buying frenzy in the spring here in Raleigh, NC.
Brandon Alfriend, CommonCents of OwnerLand Realty
While prices remain high, low activity has created a few opportunities where desperate sellers with unique properties can’t afford to wait for the “perfect buyer” willing to pay a premium for their home. In these rare cases, investors have been able to find a few decent opportunities.
Cody Willmoth, ALL-TEX Home Buyers
There is always opportunity in real estate as an investor. We have seen an influx of private capital trying to move their money from the stock market into real estate buy & hold investments, so their money is a little less volatile than the current market.
DJ Morris, Springbok Realty
If prices go down 20% you will start to see lower prices due to more inventory which will entice investors like myself who have been waiting for rental yields to start making buying a good investment again.
David Freudenberg, David Buys Houses Florida
In the long term housing prices will become lower and homeowners will face more challenges. This means that real estate investors will be able to buy more houses while helping homeowners avoid financial ruin.
Trevor Augustus, Jax Home Offer
The big national home buying companies have stopped buying, but local guys like us still are.
If you knew the impact of this situation on your business in advance, how would you prepare your business to mitigate your losses or even profit from it?
Matt Buttner, My Florida Home Buyers
We’re fairly optimistic that the real estate market will come out of the pandemic somewhat unscathed. We’re already taking steps to serve motivated sellers who would have otherwise sold to the iBuyers if that were still an option.
We do not expect a housing crash as we saw in 2008, but we are adjusting our values down about 5-10% in preparation for a market softening. We’re also being more cautious with what we buy and avoiding large renovations and luxury properties. This is also a great time to streamline your business and cut unnecessary expenses. We’ve audited our finances and made several switches to more cost-effective service providers during this time which will save us money every month.
Tyler Lewis, Sell Now For Cash Fast, LLC
If I knew about something like this prior, I’d 10X my effort leading up to said known event. I’d fill that lead pipe up so full that if something happened, and I temporarily couldn’t generate leads, we would have enough business to convert during a “stay home” nationwide measure. I would heavily nurture those leads through the event and convert whatever possible.
Cody Willmoth, ALL-TEX Home Buyers
If we saw this coming we would have picked up properties about 10% less than what we were buying at. This would give us the cushion to keep moving with the transaction without having to renegotiate in order for the numbers to make sense.
Uriah Dortch, The Inspiring Investment
Had we known what was coming, we would have pushed harder on some sellers earlier this year to make a decision which hopefully would have resulted in a home purchase.
David Freudenberg, David Buys Houses Florida
We would do what we are already doing, which is short term being more conservative with our offers and long term—looking to make more offers.
Henry Angeli III, Henry Buys Homes LLC
I would double down on the opportunities and immediately take action on the promising pursuits.
What marketing channels do you prefer to use during the pandemic over the rest and why?
Matt Buttner, My Florida Home Buyers
Motivated house sellers are still searching online for ways to solve their real estate problems, even during the pandemic, so we’ve doubled-down on Google and Facebook Ads. These platforms have become less expensive as some competitors have slowed or stopped their market, which we see as a big opportunity.
We’ve continued our direct mail spend, not because it’s now cheaper, but because the uncertainty has caused many of our competitors to stop. This allows our mailpieces to stand out even more in a less crowded mailbox.
In addition to paid online advertising and direct mail, we’re also working on content that will rank well organically for search phrases related to the pandemic. Taking shots at the iBuyers who backed out of their contracts and left sellers stranded is an easy topic to build content around.
Henry Angeli III, Henry Buys Homes LLC
Website/SEO, PPC, direct mail, referrals, social media posts, and my network because they are all relatively cheap compared to the returns I get from them. SEO has hands down given me the best return overall.
Tyler Lewis, Sell Now For Cash Fast, LLC
Our main source for leads right now is cold calling. Lots of people are home from work and answering the phones. Contact rate is slightly up from what we’ve seen.
Randy Sinda, WeBuyHouses916.com
PPC is our channel of choice. PPC delivers our message to a targeted audience that is actively seeking support and solutions to problems they may be facing in their lives.
Cody Willmoth, ALL-TEX Home Buyers
Cold calling targeted lists has always worked well for us. And now people are home from work and answering more than before!
Trevor Augustus, Jax Home Offer
We love online marketing because it lets us get our message out to people who are looking for us right now.
David Freudenberg, David Buys Houses Florida
Google SEO because of inbound leads converting higher.
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