The Coronavirus has caused stocks to go down in value, and as a result this leads to fewer people willing to invest in Real Estate. Today in this episode we discuss the impact Coronavirus has had on Real Estate here in NJ. Stocks have dropped in value because of this pandemic while Real Estate has held out and has retained its value; however the former affects the other. Find out why today on the Passive Cash Flow Podcast episode 19!
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Peoples Capital Group has been helping passive investors build wealth in NJ real estate for 10 years. Visit www.PeoplesCapitalGroup.com to find out if you qualify to start earning passive income and pay less taxes via investing in real estate. IRA’s and 401K’s are accepted.
Aaron Fragnito: All right. Ladies and gentlemen, it’s Aaron Fragnito, your host of the Passive Cashflow Podcast. I’m back today with a topic, of course everyone’s talking about it, the Coronavirus and how will the Coronavirus affect our real estate values here at Peoples Capital Group for our investors and your real estate values as well. We’re going to talk about three scenarios today, three different scenarios that will affect our economy for a short period of time, a mid-period time or a longer period of time. I’m going to go through some of the different scenarios to cause this possible recession and how that can affect our real estate values here and how it would affect our investors.
Let’s break into it here. I know this is a tough time. We want to continue to monitor what’s going on and wait and see what’s happening. Every day we get new information. What may happen next is that there could be lockdowns in certain areas, certain counties might lockdown states or the entire nation. We’ve seen that in parts of Italy there where they locked down. Basically, you can only go to work if you’re a firefighter or a sanitation worker, someone who’s necessary to saving lives really EMS, doctors.
Of course real estate investors and mortgage brokers and all we all got to work from home. That is what most likely will happen next. Lockdown means no businesses, no restaurants are open, except for supermarkets and pharmacies and hospitals. That’s going to really cause an effect on our economy. We already see the stock market losing a lot of its momentum about 30% of its gains over the last two years have been lost here. That is very frustrating for many of our investors that are heavily invested in the stock market, and we feel for them.
With our real estate values here, we don’t see that type of drop ever happen overnight, that is one of the reasons we do think real estate in the North Jersey market multifamily real estate, not storefronts, not office space, those spaces are going to get hit pretty hard. Multifamily real estate, that’s middle of the road. Not the most expensive, not luxury real estate, but not super low end real estate either. Middle of the road real estate, those types of apartments will remain in high demand because people can afford those in tough times as well.
We do focus on buying apartments buildings that are middle of the road and because of that, we do continue to see demand although I think right now we have not really seen the impact yet on the real estate market that this virus will have. If there is a slowdown for about a month, I think that’s going to cause a small recession of about three to six months where we’re going to see a slowdown of growth and rent growth and property values.
Then I think it should pick up again because the banks are well-funded. There’s a lot of cash in the coffers, this is not like 2008. There is a lot more strength in the economy. Unemployment is very low. If we all close our businesses for 30 days, that’s going to be tough and the businesses that government is going to support our local economy with stipends and payments and things like that, which is great but that can only last so long and only have so much of an impact.
I think what’s going to happen is eventually we’re going to say, “Listen, if you want us to be quarantined any more than a month or so it’s just not a realistic option. Americans need to get out and go out and live.” We’re seeing this virus also usually when middle aged people get it who are healthy, they fight through it, and they survive just fine. It tends to kill older individuals over the age of 80 or people with weak immune systems. Of course, you want to be careful and try to avoid it.
I think it’s going to get to a point where if we do stay quarantined for too long, we’re just going to go back out and live our lives and say, “Hey, that the risk is worth the reward.” If that doesn’t happen, though we are quarantined for a long, longer time, and there is some type of national lockdown for some period of time that would affect our real estate values, that would affect the recession or some type to take place, I think. Markets grow and markets shrink. It’s not the end of the world if there’s a small recession at this time.
Again, the banks are well-funded. It’s a lot different than 2008. I don’t see a collapse of the real estate values as we saw back then. I do see people possibly losing their jobs, possibly being out of work for some time and we’re going to work out payment plans with those individuals. If we know you’re going back to work in two months, it’s a lot different than losing your job. Where in 2008, you lost your job well now you might be out of work for a month or two, but we’re all going back to work at a certain time. Really, we recognize that we’re going to work out payment plans with a lot of our tenants, if times get rough.
The other thing is, if there are evictions well, what often happens are your tenants that have the lowest income and are paying the least amount of rent tend to be eviction sometimes so that allows us to actually turn over the units for higher rents. Sometimes evictions can result in a positive for the landlord. Now, if there is some type of long-term quarantine again, I don’t see us actually cooperating, the American society we’re too energetic and we have too much going on to really close our businesses for more than a month or so. If there were some type of six month, close down of business, which is very, very unlikely, I could see obviously a large recession hitting for 12 to 18 months, in that case thereafter.
I really don’t think that business owners and consumers alike are going to be able to quarantine and cooperate for more than a month or so. I think we’re going to really try to nip this in the bud right now. I see a lot of people taking it seriously. We’re trying to take it seriously here at Peoples Capital Group. We’re still providing an awesome service to our investors. We’re still allowing people to move their money from the stock market or whatever it is into passive cashflow opportunities in the New Jersey real estate markets.
If you want to learn how you can do that, if you want to diversify into real estate go to peoplescapitalgroup.com. We are focused on servicing our tenants right now, making sure our tenants are safe. A happy tenant means we have a happy investor. We’re also really focused on communicating with our investors. We know it’s tumultuous time. We want to be a resource for them to not only keep learning about how to protect yourself through real estate but also what’s going on in our buildings, how are rent collections, how we’re leasing.
Our rent collections are fine, our leasing– We just leased a unit last week for top dollar. We have not seen any effects just yet of this virus, but I do recognize that there could be some slowdowns in the future. We’ll probably keep disbursements in this quarter and that allows us to keep extra cash in the coffers for the unknowns of the next quarter or two. That’s a great way of just making sure you’re going to batten down the hatches. You’re well-protected. The assets can stand on their own two feet if there’s a slowdown in rent collections. That’s good for our investors to protect their investment. Then if it’s a less of a slowdown than we think, well, then those distributions are sent out down the road when things calm down a little bit.
Hopefully you’re safe. Hopefully you’re healthy. Remember, don’t panic. Don’t watch too much in the news media. They’re there to get you to click on whatever they’re saying. Hopefully, you’re improving yourself through this time and improving your investments and keeping your family safe. If you want to learn more about diversifying into real estate here with us at Peoples Capital Group, go to our website, peoplescapitalgroup.com. Have a good day.