I recently watched an interview between DJ Vlad and US property tycoon Grant Cardone about how Covid-19 has affected the US property market and after analysing the full interview I have condensed the 75 minute video into a 4-5 minute read.
First of all for people who aren't familiar with Grant Cardone, he is a US property investor who's portfolio is centred around 'multi-unit properties' which in the UK is equivalent to apartment blocks or small estates - basically an investment with multiple tenants each of which form their own household.
"If you want to take care of your health and family you’ve got to have money"
In the video Grant states that his multi-unit portfolio consists of 8000 units and in April his rent collection was still at 93.8% which means that only 6.2% of tenants didn't pay. When asked why the collection was still at high percentage he explained that it was because his properties weren't seen as "unaffordable", they where generally properties with a monthly rental of between $1,200 - $1,800 which equates to £970 - £1500.
How does Grant's rent collection % compare to mine?
My monthly property rental income in April 2020 was the lowest it had been since January 2019. It had plummeted from £9,158 pre-covid to £5,563. I had 3 units which had become empty (known as voids) and had 7 tenants fail to pay rent.
Grant Cardone's April rent collection 93.8%
Little Investment's April rent collection 66.7%
Changes to the housing market post covid-19
Grant believes that more people will become 'renters'. As most mortgage lenders are significantly changing their criteria for house purchases it will make it more difficult for people to purchase their own home. Residential mortgage deposits have quadrupled from 5% to 20% in most scenarios, so if people couldn't afford a deposit pre-covid then its almost impossible to afford one now.
And if people can't afford to buy a house ... they will continue to rent.
Great news for us landlords!
Student Accommodation & HMO's have "had their nuts cut off"
Out of the 7 tenants who failed to pay me rent in April all of them where tenants in my HMO's (House of Multiple Occupation).
Grant's never bought 'student' accommodation because they're dependant on universities for the rental income & as he explained in the interview, student housing has had its nuts cut off. He continued ... Students can’t go to class because the university is closed, parents want their children home and in-turn stop paying the rent.
Do I regret having numerous HMO's?
Absolutely not.
Yes, in a global pandemic I might not receive all of the rent, but in normal conditions they provide me with serious cashflow.
If you're reading this article and have HMO's yourself, how has covid-19 impacted your rental collection?
Covid-19 & evictions
The main piece of legislation brought in to place regards evicting tenants during this pandemic is the'90 day rule' which means landlords will not be able to start proceedings to evict tenants for at least a 3 month period. As a result of these measures, no renters in private or social accommodation needs to be concerned about the threat of eviction.
"No landlord ever wants to evict anyone"
As the interview progressed, Grant gave his opinion on evictions during covid-19, he summarised by saying no landlord ever wants to evict anyone, and then went onto the subject of Natural Laws when it comes to renting and how they always supersede the real laws. The following is what Grant believes to be the Natural Law & mindset of 'renters'
"I should pay my rent even if I don’t like this place because I want to leave here and go to better a place, if you don’t pay your rent here you can’t go to a better place".
Q. How many people do you know that have chosen not to pay rent because of the 3 month ban on evictions even though they where still in employment and could financially afford it?
The AirBnB Market
Grant's view is that "Airbnb is done" as serviced accommodation depends on travel. "Right now you can't even go to an AirBnB even if you want to."
I currently have 1 Serviced Accommodation unit which I advertise on AirBnB and Covid-19 has had a massive impact on it. Due to the virus, all travel was pretty much cancelled and all current bookings were cancelled by the guests without any pay-outs.
"Cash is Trash"
You may have heard of the saying 'Cash is King' but after watching the interview between DJ Vlad & Grant Cardone you might start to think that 'Cash is Trash'. Cardone argues that money sat doing nothing is money depreciating in value and he's right. Due to inflation, £100 in cash today is not worth £100 in cash next month. In the last 25 days, 10 trillion dollars have been printed in the US, and in March the Bank of England announced another round of Quantitative Easing (now totalling £645 billion). Grant finished by saying that the value of assets rise inline with inflation whereas cash decreases.
If you have cash sat in the bank depreciating in value ask how we can help https://www.littleinvestment.co.uk/invest
3 more things taken from this interview ...
1. Purchase properties in areas of job growth
2. In recessions employees with the highest wages are most at risk financially
3. Although the banks base rate is low - debt terms aren’t favourable
If you want to watch the full interview between DJ Vlad & Grant Cardone you can here
Thanks for taking the time to read this article.
Ryan Little
little articles.
big talk.
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