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April 2020 Newsletter

The Coronavirus has taken over our entire way of living. 41 of our states have issued a stay-at-home mandate, requesting that we only go out for essential tasks. Where do we go from here? What do we do if we can't work? How much Netflix can we truly watch? These are all questions running through millions of Americans heads, and today, I just wanted to bring some clarity to this crisis and reassure you that the sky is not falling. It's merely dripping. As of today, there have been 1,340,456 confirmed cases of the coronavirus, globally, and among that number only 74,442 deaths. That's only 18% of the infected that are dying. Now, that's not to say that "oh look, it's only 18%" absolutely not. That's merely to say, if you look at the numbers, the flu wages more severe war than COVID-19. Every year, on average, the flu infects millions of people, globally. Out of those millions, an average of 59,000 die every single year. This has been happening for decades... Moving over into economic factors, we notice that over 10MM people filed for unemployment in the month of March alone. We haven't seen unemployment go that high since the Great Depression! With unemployment so high, and consumers not spending any money, the economy is beginning to go in a downward direction. Mainly due to the fact that 70% of the U.S. economy is made up of consumer spending. So, the government's first reaction to this crisis, SAVE THE ECONOMY! They pump over $2.2 trillion back into the U.S. & into people's pockets. At first this seems like it would be a tremendous "fix all" for all of our economic issues, & that is still yet to be seen, but what we now need to be looking at is how will our economy react when this is over now that all this new money has flooded the market? Typically, when there's such an astounding volume of money entering the market, the economy will thrive which will cause inflation, which usually causes wages to increase as well. However, in our current economic state, businesses aren't making any money, and consumers aren't able to work. Once everyone goes back to work, and the economy begins to stabilize, we'll see inflation take its toll. I don't expect inflation to be drastic, but it will be enough to cause an unsettling in the workforce of America. Highly due to the fact that wages will likely not increase, at least not until businesses begin seeing some real economic activity and people begin to feel comfortable being around large groups of others again. So how does this affect real estate? I wrote an amazing blog post on both multifamily real estate and residential real estate and how each are affected in their own different way. You can check those blogs out on our website at the link below! Moving forward from this epidemic, no one knows for certain where our economy will be left, but one thing we can be for certain is that America will be stronger for it. Deals: I would love to say that we have high capped opportunities for our investors right now, but with everything going on, we are taking things very slow and conservatively. The few deals we are looking at, are currently being priced at Q1 cap rates & that just isn't justifiable being the massive shift we've all seen in the market. Moving forward from here, we are waiting to see what the collections will be like in our current assets, potential future assets, among our other investors assets in order to see how we can truly price assets. A solid standing point for us and our investors is to wait at least two months before highly pursing one particular deal in order to get the highest, most justifiable return. We also expect in the coming months for cap rates to be higher and for future deals to be more lucrative than we've seen in decades! Our recommendation is to stay as liquid as possible, & be ready for when that perfect deal comes into your inbox. We are entering into a buyers market & sellers are going to become a lot more motivated than they were in the past. Mobile, AL Market Analysis: As far as I've been able to see, deals are still being done. Capital is still moving. First-time home buyers are still buying homes in the midst of COVID-19. Multifamily deals are being sold and purchased. Most of this is on a grander scale with seasoned investors having 20+ years experience, but nonetheless, Mobile, AL is still proving a phenomenal market with sky high potential and, pre-corona, proven 17% IRR returns. Rents aren't even taking a hit. We haven't seen any decrease in rent, but potentially a plateau in the coming months. (instead of the 3-5% increase we've been seeing) Moving forward, the economy has taken such a shift, that no one wants to produce any numbers because of the constant change in the market. I'm sure we will see a slight decline in appreciation, property values, & liquidity. But, one thing that will remain strong is our ability to find cash-flowing assets, with real property, producing real returns for our investors. All in all, COVID-19 has had a profound impact on the world & the economy, but our economy will bounce back. Two years from now we'll all look back and laugh at how we, not only weathered the storm, but thrived in the midst of it and were able to capitalize on the most lucrative opportunities in decades! To your success!

If you want to see the blog posts click here.

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