Be Ready Be Resilient
As the Covid-19 situation unfolds, it’s a great time to get prepared to take advantage of opportunities as they arise, writes Nick Gentle.
1 April 2020
As I write this the Government has just announced a $12 billion aid package to help Kiwis and business owners through the economic impacts of Covid-19.
On March 16, the RBNZ slashed the OCR to 0.25%, a historical low. 48 hours before that, it was announced that all international arrivals would need to self-isolate for 14 days, effectively ending international tourism in the immediate term.
I don’t know what will have happened by the time this article is printed, of course. Things are moving fast. We now live in interesting times.
I was on the 12th floor of a building in Tokyo when the March 11, 2011, earthquake struck off the coast of Japan and the feeling of tightness in the back of my neck while sitting at home watching nuclear reactors on fire, matches what I and many are feeling now. It’s tense, people.
What does this mean as a property investor? We need to be ready to take opportunities while at the same time be resilient to potential risk. My first phone call this week was to my broker to max out my pre-approval and revolving credits. Why? I want bullets in the gun if a good deal comes up; and access to extra cash can help through many situations, good and bad.
If all you are doing is scrolling through Facebook reading bad news then stop, it’s time to get in control. Here are somensteps to follow…
‘Get some ammunition ready because many people who could buy will not, so you should expect some opportunities’
Step 1: Breathe. Remember that anybody who held their assets through the previous downturn, let alone earlier market cycles, is now wealthy. All those conversations about how such-andsuch’s success couldn’t be replicated because the market is different? Now it is your time.
Step 2: Take steps now to increase your resilience and add flexibility. Increase revolving credits, look at your loan structures, depending on your situation, can you go on interest-only for a while to increase cash?
Step 3: Cashflow is critical, more so in a downturn. I have owned a property that dropped 30% in value. It was cashflow positive when I bought it and it was cashflow positive right through until it shot up in value again. Have a look at what has just happened to the OCR. Cashflow will improve for many
Step 4: Get some ammunition ready because many people who could buy will not, so you should expect some opportunities. With interest rates this low, many people will be able to hold their properties through a rough patch, but I do expect to see a lot fewer buyers and again, cashflow is cashflow positive. Call your broker and start to figure out what you could move on if a deal appears.
Step 5: Exercise, take time off and find things to enjoy. It is good for your health and your mental state. Regardless of what happens from here on out there will be stress, uncertainty and alarming news headlines – so you might as well get on with living. We are incredibly fortunate in New Zealand to have a wonderful outdoors and now is the time to make sure you experience it.
Step 6: Start talking to people and (without breaching health guidelines) making connections. We are being told to isolate when humans need social connection. Did you know everybody is at least as nervous as you are? Believe it. Connect with people, talk about what you’re looking to do and opportunities will come your way. I have been in the property finding/ buyer’s agency business for many years now and I know what opportunities arise from our ability to build networks on the ground and connect buyers and sellers. If you manage your risk and stay active in the market while the world is watching, then you will do very well.