There’s always an opportunity out there even in times of crisis. All that matters is that you adjust to what the circumstances are and simply have a plan of action and be prepared to tackle your plan and invest in an effective way.
For those who are interested in investing in times of crisis or in times of this pandemic, we are going to review some of the different opinions and studies that recommend what to do in these hard times.
The way the funding is actually allocated, per state, is that it’s determined by the amount of people that live there, by population. If you’re wondering why? The higher the amount of people, the higher the demands, the higher the needs. The allocation of funding needs to be distributed accordingly in order to better satisfy or, in this case, meet everyone’s needs.
The CARES act that was passed in late March and fundings are allocated at the state level. Once those states receive a certain amount, whatever amount is allocated to them, then within that state those funds need to be distributed locally as well. The counties that have 500,000 people or above are the ones that are going to receive the biggest chunk of it.
Areas to invest: The Ohio case
Let’s assume we have a certain amount of counties that meet that criteria, they’re going to receive all of that funding, and then after that whatever’s left is distributed to all the other counties out there within that state. A good example is Ohio. Ohio has an allocation of let’s say here $4.53 billion, and they have a state population of 11.69 million people. 4.44 million people live within the five eligible counties of 500,000 people or above. 1.72 billion is associated with that share of the population.
These counties can claim 45% or 775 million of this total, and then the state will pretty much keep whatever’s left of it. These countries are the top five counties that have at least 500.000 people:
- Franklin County
- Cuyahoga County
- Hamilton County
- Summit County
- Montgomery County
Then out of these fundings that is actually distributed, part of it it’s going to go to the state distribution and then the other component of it, it’s going to go to the localities. The remaining funds are actually included in the distribution. It is important to be aware of this because you need to know which states still can meet demand.
Why is this important to invest during a crisis?
“Why do I care how these fundings are being distributed?” Because you need to understand what’s going on locally with the economy. You do not want to go ahead and invest in an area where there are no jobs, where there are no demands of rentals. The number one criteria that you need to look into is one, the population, because the more people are in an area that means the higher the demand for rentals.
Typically, the months with the highest demand are usually the months of April all the way to September and sometimes even pushing it to October. Starting in April is what a lot of real estate investors call the spring months or the spring times, and this is the time of the year where people either usually start buying properties, selling properties, or just simply moving.
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When your contractual obligation ends is because that’s what the lease was for, and now they have extended a contractual obligation to another tenant who is getting ready to move into that space. There’s a lot of activity, a lot of moving pieces that happen around.
The funding is to cover for unemployment but at the same time, the fundings that each one of those states are receiving is to also cover infrastructure. By infrastructure meaning:
- Transportation
- Assistance for children and families
- Education
- Injecting money towards the economy
- Social programs.
This is very different from 2008 where a crisis hit and the government came in and bailed out the banks. That doesn’t work out this way. The government is here to help the people. They are offering a stimulus to help the people, they are offering money to help small businesses because they can’t just simply let the infrastructure go down.
The people that are losing their jobs, and it’s definitely something that is very unfortunate, but the group of people or the population that it’s currently losing their job are people who were working in retail. It’s in general retail and the type of service that requires you to be present, but the infrastructure cannot shut down.
Reverse Funds
It is important for you to understand how the states are doing in terms of rainy funds or in terms of reserve funds because even though they’re getting assistance from the CARES Act and the government is providing them with assistance, you need to make sure that that state can still manage to basically keep running while the funds get there.
It is very important to understand how the States are managing to stand on their feet and keep running in the meantime until the government assistant or in this case, the CARES Act money gets to their state so they can continue with their infrastructure and running all the operations as they normally should be doing.
California, Oregon, Wyoming, Texas and Georgia are the states with the highest amount of reserve funds available. There are some states that are in the middle of the rating like Ohio, Colorado and Arizona.
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You also want to make sure that the state has enough population so that you know that there’s a man out there for rentals.
The top landlord friendly states are ranked by the following criteria:
- Eviction process
- Property taxes
- Rent control
- Legislation
- Licenses
Alabama and Arizona are one of the states that are considered more landlord friendly. There’s also Indiana, Georgia, Kentucky and Texas, Florida and Illinois. On the other hand, the list of States with the best allocation of fundings during a crisis are:
- California with a good allocation of 15 billion
- We have Florida with 8.3 billion
- Illinois with 4.9
- Georgia 4.12
- New York 7.5
- Michigan with 4
- North Carolina with 4 billion
- Ohio with 4.5
- Pennsylvania with 5 billion
- And Texas with 11 billion
This means that investing in real estate in these states has a lot going into it. Investing in real estate is not about just simply going into Zillow and looking at pretty pictures and making sure that the house is looking pretty in order for you to invest.
A lot goes into it. Understanding legislation, understanding what’s happening with the economy, understanding what’s happening locally as well. There is a big amount of research that is going into it.
You’re going to take a look into what the school systems are and the job demands, also research about crime in those states or in the county you want to start your investment.
In our website we have a free webinar that talks about all these topics you have to take into consideration when investing in Real Estate. If you want to do a review of what you have learnt, watch our free webinar and reinforce the knowledge you’re getting with us.
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