4 Tips to Commercial Real Estate Investing During Crisis

Tip #1: Remove Emotion 

Focus on the facts, not the fear. As you know the more fear you have, the more you feed your fear watching the news, the more emotional you're going to get. When emotions go up, intelligence goes down. Am I concerned about being able to collect the rents? Yes, I am concerned, but I’m not afraid because I have facts. Here are the facts:
  • Expect a reduction in rents:Everyone is not going to be able to pay their rent at the beginning of the month and we're preparing for it.

  • We have reserves: When some people can't pay their rents, we have savings for each property to help us fill the gaps.

  • Our government is helping: If we can't collect their rents and we use up all our reserves, our government is helping with mortgage payments. For example, Fannie Mae or Freddie Mac have agreed that if we can show that we're impacted by COVID-19, and we can't pay our rents, they're allowing us a 90-day forbearance period of not paying the mortgage. That helps tremendously. I've also heard some utility companies may be following suit.

  • Small business loans and grants are available for commercial property owners: To help make payroll, buy equipment and stay afloat.

  • Homeland Security has deemed commercial real estate an essential business: Meaning that we can stay open. We don't have to shut down.

Tip #2: Increase Your Marketing for Deals

I know that sounds a little crazy, but this is not the time to follow the herd. The herd is retreating. We're teaching our students to move forward and even be more aggressive marketing and looking for deals. One of the biggest complaints has been that all the good deals are taken and people are paying way too much for property. Well, now because of the coronavirus, those same people are fearful and sitting on the sidelines. That means there's less competition for us, so we can be more aggressive.

Tip #3: Make Lots of Intelligent Offers

When I made all those aggressive offers in 2001, 80% of my offers were rejected. However, the 20% that were accepted allowed me to leave my job. Market aggressively and make a lot of intelligent offers. Don't hold back.

Tip #4: Raise Your Management Game

This tip is for those of you who have already closed on deals or those of you that already own commercial property. It's time to raise your management game because your rents may be postponed. Meaning you need to watch expenses and pay more attention to your operations. Think about the long-term because commercial real estate is a long game.
Focus on:

  • Cashflow

  • Being a good operator

  • Your expenses

  • Collecting whatever rent you can

Final Recommendations:

Be careful who you get your advice from during this crisis. I advise that you learn from someone who has some gray running through their beard. Someone who has navigated through economic crises already and prospered. This is contrarian investing. We're going against the grain. Although it can be very profitable, you can also lose your shirt. It's very important that you learn from the best because for those of us who are older, an opportunity like this may not come again in our lifetime. Also, if you make a mistake you may not have enough time to recover, so be very careful.
Source: Commercial Property Advisors

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Tony finds that living in the Bay Area and working with unique people every day make his job extremely rewarding. He has expert negotiation skills and takes great pride being a relentless advocate for his clients.
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