In my view, thriving with real estate investing during COVID meant having a strong handle on basic skills. When the market was getting roiled by various issues and panics, being able to keep a firm perspective on a property’s valuation was as critical as ever. Likewise, investors who had the presence of mind to keep sorting through leads and setting up new deals were able to flourish, same as always.
In contrast, I saw a handful of failing real estate investing businesses in 2020, all of which had trouble with basic functions like scheduling contractors and finding prospects. They also tended to be stuck in one mode of operation. If contractors weren’t available in their area to do fix-and-flips, they didn’t try to pivot to wholesaling or developing properties for rental income. So, the many tiny problems wrought by the pandemic tended to snowball into major obstacles to making revenue.
If you’re not sure how your business will fare in the probable upheaval of the next few years, now is the time to settle your uncertainty. By implementing a few key strategies, I’ll show you how to thrive in tough and unpredictable times.
What Makes a Business Resilient?
My word for the trait that helped real estate investing companies survive last year is resilience, but as I hinted at earlier, resilience comes from the perceptive command of the business basics.
In a nutshell, you can create resilience in your investing business by:
- Being prepared
- Being flexible
- Building strong professional networks
- Having a persistent and multi-stream marketing campaign to generate leads
- Budgeting defensively rather than aspirationally
Let’s take a look at each of these elements in detail.
Preparedness means being ready for the potential markets of tomorrow while also having a plan for how to succeed in today’s markets.
While nobody was exactly prepared for the pandemic, you can bet your socks that there were some investors out there who had done their diligence on how to survive in a wonky market where prices were rising rapidly, and foreclosure properties were hard to come by.
The benefit of preparedness is that you can bank extra money and leftover mental energy to save them for a rainy day when they might come in handy to preserve your profit margin against an external shock. You don’t need to predict the future; you just need to have a few rough plans covering what you might want to do in certain economic conditions. And, having a rainy day fund with which to implement those plans is also something I’d highly advise.
Flexible businesses can pivot when things aren’t working. In the realm of real estate investing, pivoting during 2020 might’ve looked like grabbing some underpriced commercial properties and re-developing them or going into wholesaling rather than going for the traditional fix-and-flips.
If you can’t reorganize your resources to target a new segment or perhaps even attempt a new business model, intense shocks to the market can send you into trouble very quickly.
Flexibility is mental, too. If you think of yourself as a house flipper rather than a real estate investor, you’ll have a more challenging time doing something different when the situation requires it.
- Strong Networks
Many people experienced a shrinking of their personal and professional networks during the early phase of the pandemic. Tangential contacts drifted out of touch, and core relationships were tested, and often reinforced. It also became much harder to form new strong links without the help of in-person communication.
All of the above underscores the utility of a powerful and deep investor network. If your traditional sources of leads dried up in 2020, a network could have been decisive in helping your business survive. And, there’s always a benefit to having people you can reach out to for mentorship or advice when economic conditions are throwing you for a loop.
- Persistent Marketing
As you may have guessed, if you started a new marketing campaign during the first or second quarter of 2020, it may not have been very successful, as people were busy worrying about other things. However, if your marketing campaign was operating well before the pandemic, it was probably familiar enough to keep working in 2020.
Remember, you can always reduce your marketing spending if you need to. But the leads that your marketing campaign yields aren’t usually the product of any single month of marketing activity, but generally the result of an ongoing effort. Try not to skimp on it during the thin times, as it could be self-sabotaging.
- Defensive Budgeting
What’s the best way to avoid running out of money? Spending less than you make.
Unsurprisingly, frugal and conservative budgeting is perhaps one of the essential basics for real estate investing during COVID. And, like many of the other pillars of resilience, defensive budgeting should be an all-the-time thing, not just a pandemic-era thing.
To budget defensively, assume that things cost on the high end of your estimates, and that the returns are on the low end. Leave a healthy margin for being wrong about your estimations. Avoid taking deals that won’t yield a profit using your most conservative calculations. That way, if the market goes awry unexpectedly, you’ll have some slack to work with.
Building a Stable Real Estate Business
If, after reading about resiliency, you think you need to brush up on your real estate investing basics in keeping your business healthy during the next phase of the COVID pandemic, you aren’t alone. Many investors find that turning to a partner like HomeVestors® can massively increase their real estate business’s survivability and all-market profitability.
When you become an independently owned and operated HomeVestors® franchisee, you’ll get access to a national marketing campaign that’s always working to generate motivated high-quality leads for your business. HomeVestors® franchisees benefited massively from their direct links to interim financing and valuation software during the market disruptions of the pandemic.
Plus, your professional network will be strengthened by having connections to experienced investors who act as mentors for HomeVestors® franchisees. In sum, franchisees will have some of the best tools they need to keep growing even when things are difficult, which can make all the difference.
If you’re considering starting a real estate investing business, request information about becoming a franchisee today!
Each franchise office is independently owned and operated.