Coronavirus Update With Bruce and Aaron Norris #687

Norris Bruce

Bruce Norris is an active investor, hard money lender, and real estate educator with over 30 years experience. Bruce has been involved in over 2,000 real estate transactions as a buyer, seller, builder and money partner.

Norris Bruce
March 20, 2020

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This week’s radio show guests are The Norris Group’s very own Bruce and Aaron Norris. Some of their VIP subscribers are with them today as they tape the radio show. For the foreseeable future, they will likely give a presentation with an update of what is going on.

Episode Highlights

What was Aaron’s biggest concern about the results of the coronavirus?
What are some encouraging things they are seeing happen in the midst of everything?
What do they see happening in the different business facets in California?
What are the 3 Ts, and what impact could they have on rentals and rents?
What can we do to help others through this?
What are Bruce’s current thoughts on California vs. Florida?
Will construction continue to be a priority?

Episode Notes

On their website thenorrisgroup.com/resources, they are cultivating a list of resources for real estate investors and realtors, giving you direct information at the national and state level of what to follow so you can weed through the stuff that’s happening in the media. They’ve played pretty nice this week, but it’s hard to read through and there’s so much going on. On the Web site, you’re going to find everything from IRS resources. One of the things they’re following is 10:1 Exchanges, getting dates change. Taxes have changed. Also at the state level, the California Association of Realtors, the California Apartment Owners Association, things to talk about with renters and what not to. These things that you might not have thought about.

They began by letting people ask questions in an interview style. First, as of last night, California is on a little bit of a lockdown. This means shelter in place, besides emergency services, which is pretty interesting. It was an interesting day to have the interview. Aaron went through something similar with 9/11, and he will never forget there were many people at the time who didn’t like the sitting president. Being in New York City at the time, they were on lockdown, so he knows exactly what it feels like to go into a store and see the shelves empty. It’s really scary. But the media, the politicians, left and right, all banded together. At the time, we really didn’t have social media. Aaron is watching this from a very PR mind, watching what’s happening and thinking what he feels needs to happen. He is pretty happy with what has happened this week.

Bruce was happy too. He is proud that people set aside their differences. It does in a way, remind him of the baseball game that he attended right after 9/11. He had season tickets, and normally the singer usually sang the national anthem. Everybody stood and that was that. However, at that game, 45,000 people stood and all sang the national anthem. That was just a very moving moment. You just looked around and realized they all actually collectively got it. They were the same and forgot their differences. That’s where we’re at right now. We’re in an emergency situation, and the best thing we can do is think about taking care of our loved ones and realize that other people have to do the same.

It’s changing so quickly. Aaron is currently in Florida. They made the decision last Saturday to cancel their bootcamp. He was on the phone calling everybody to make sure that they didn’t hop on the plane and get over here. His fear was if they went out there, they were not going to be able to get back, and the experience here in Florida would be poor. And it is. They’re still in high season. You’ve probably seen them this week. Florida is getting a lot of flack for spring break parties at the beaches. As of yesterday, they finally started locking down the beaches. He is very lonely at the hotel, but very glad he didn’t have a lot of investors to take care of while he is here. So far, he thinks he is going to be able to get back. He was actually hoping for a national quarantine since he thinks next week the numbers are going to be so bad. The testing has got to catch up, and those numbers are gonna be very frightful. However, he is not personally worried about the virus. He is worried about the economic fallout.

When you look at the economic fallout, you just think about all these industries. There’s no one at a movie today. Life for the next 60 days as we know it is basically going to stop. We’ve not faced anything like this. This is like a combination of having a hurricane in the sense that you can see and a stock market crash where you now have to stay at home and you probably can’t go to work. Everybody’s gonna get affected. Bruce said he would rather own the asset class that they own because he can see that things will stay in place and stall. However, when it comes to the stock market, you can see every second, when it goes up and down. So it’s down some 35 percent, silver down 35 percent. They are already preventing that by saying you can’t foreclose. Bank of America came out and said they were basically going to shine on the payments. All of a sudden this is getting a little safer because it seems like it’s a team effort across the board. So that’s an important thing.

We are in round one, and he thinks there’s going to be at least a few more of these rounds of support. Aaron was really pleased to see them not go back home. Congress did not take a break, and they’ve committed to getting these rounds of things put out. So he was really happy to see that happen.

Bruce said when it happened, he did not really take it seriously until they closed Italy. That got his attention. Then there were all the sports. You start realizing all these things are happening,and it is the first time in his life any of these have happened. Warren Buffett comes out and says, “Yeah, I guess I had to wait eighty-nine years to see this.” So that’s a big statement coming from a guy like him. Then we do the radio interview with Raoul Pal and he uses that word depression. That’s why Bruce asked if that was a word he had ever uttered in all the years he had done this. When he said no, that was meaningful. Mohamed El-Erian just used the word depression yesterday. This is serious stuff and we’re getting on to what we need to get on. We’re trying to mitigate the damage and also the health risk. That’s why this is necessary. If we lock down really well for 60 days, we’re probably on the other side of the curve of death and new cases. If we don’t, this is a much longer deal.

The other exciting thing is that within the last 24 hours, it looks like there’s been several different moves made for treatment, a vaccine. They’re running full steam ahead on several different paths to try to mitigate the virus. It’s just great news. Aaron is always a glass half full guy, so he is really excited for Main Street in particular. We got news this week that Redfin and OpenDoor are out. The Norris Group was hearing from people that don’t usually use them for hard money. When he had a conversation last year with one of these Wall Street hard money lenders that quit and came to them wanting to buy their paper. The strategy was if you originated at 9, I’ll take it down at a seven. We’re taking on Wall Street style leverage. We’re packaging it up and selling it as bond rated paper to pensions.

You’ve got these Wall Street companies that are very reliant on these lines of credit. Aaron asked if that will disappear. Bruce said it definitely could. That’s why the Fed is preparing to do, if already in place, well over a trillion dollars to back business bonds. They may be the buyer instead. Normally that’s the buyer of last resort. That’s what’s been going on in the repo market. You come there with your assets and expect the buyer to take it for a very short period of time. That buyer has been stalling or not wanting it. Now you have the Fed stepping up and becoming the end of that trade. So this is definitely a very unique time.

If they say they are going to build a hospital in ten days, they’re just able to do something without permits push it to the end. Bruce likes the fact that we’re taking this on on the medical side. He is sure there’s usually a progression of going through and it could take a year and a half. This can’t take a year and a half and we know it. We’ve got a lot of smart people that can work on this simultaneously. That is encouraging because you do see how we’re working on things that are not only prevents it when you take it but also mitigates it. It’s exciting to see the brains in our world working really hard at this.

For the Main Street investors and realtors, this is where we get to shine as these Wall Street companies pull the plug on operating in the markets. They disappear as competition, and he doesn’t know yet if they’re going to decide to come back. This has forever changed their business model, and he was already very excited about certain realtor brands like Keller Williams and Compass doing it.Those local boots on the ground would be so important anyway, because context and flavor of a local market is just really difficult to replicate with artificial intelligence, and it’s just not there yet. Aaron thinks investors and realtors are going to have a unique opportunity to shine. He created a video on Monday that some people thought might have been a little bit early. He has seen people do some really stupid things with marketing. Now it’s just the time to take a step back and realize that some people are taking this really seriously. All of us have never been through this before and dealing with being scared if you’re gonna be able to get food or not. It’s jarring. He already has friends posting online that they were told to come in and pick up their last paycheck.

They went on to talk about the different facets of the business and how they’re feeling about them. Aaron asked what he sees the flipping business looking like in the foreseeable future. Bruce said having flipped a ton of properties, he knows you don’t expect income from it until the end. That’s not a surprise, so usually you’re not taking on debt that you can’t support so far as the borrower side. That’s not a shock to their system. What might be a shock to their system is you’re probably going to have very little to no progress on repairs. You probably will have a pool of buyers that are frozen for a while. You are probably tacking on two months to year cycle at best. This means if you’re a real estate investor, just include some extra time in your calculations.

You just have to realize that the buyer right now is like the deer in the headlights and you can understand why. It doesn’t mean nothing will sell. First of all, we are not even supposed to be out showing houses. This is just a once in a lifetime event. If you own stuff with debt on it and you are capable of making your payments, Bruce would encourage you to do that. He has been there where someone said, “I have six things in escrow and six things fall out. I’m a small guy, small flipper. That could be an impactful thing.” Bruce thinks the Norris Group could play a role in that by having that conversation. If that’s gonna be an issue, call them and let them know. They will call the lender and have a reasonable conclusion. We’re in this together. It is a once in a lifetime event on both sides of the table.

We have great lenders that understand the business and have been through tough things before with us in 20008 and 2009. We all survived that and did fine. On the borrower side, he was able to go back in with Aaron to present in Washington, D.C.. Member. They had that little circle in 2009 or 2010 with their current ratio as far as payments being made on a hard money loan with an interest rate over 10 percent. It was ninety nine percent plus current, and we’re talking about to Fannie Mae, who had way many times more delinquencies on their A paper. They were having a discussion about making more loans to investors.

We have we have a great pool of honorable investors that make payments and a great pool of people that put up money and understand that when this kind of thing happens, I think we’re gonna be reasonable with each other and Bruce will encourage it if he gets in the middle of it. Aaron thinks this is where we’re going to get a time to shine as well. We are still lending in California and Florida. Florida has been interesting. When he got in, he happened to have a meeting with the Economic Development Agency in an area that they’re building. That was a great meeting. They put it together with the planning department, building department, economic development, and neighborhoods. So there were four leads from the city there, and they were discussing a lockdown. But it is their absolute goal to try to definitely keep the wheels turning when it comes to development. So it is a priority category for them. It’s nice to just at least hear that.

The other thing that was interesting is hearing that this is their seasonal time. March is typically spring break here. It’s their busiest month. People are leaving early. One of the things that realtors are experiencing, however, is on their way out. People are writing offers on homes. This is a theory; we’ll have to wait to see what’s tested. They get a lot of visitors from the Midwest as well as the East Coast. Aaron wonders if they’re sitting back and saying, it’s time. It’s been a good run in these states. It’s just too expensive. I need to rethink retirement. It’s going to be very interesting to see if Florida remains to be the number one in that domestic and the number two in immigration nationwide if that doesn’t actually accelerate because of this event.

John Burns had a report that he had put together for this virus. One of the charts he had showed the sales of new homes in Florida year over year were up over 50 percent, and that was right before this happened. Right before all this stuff hit the fan, Florida was selling a lot of new homes, even compared to last year. He is not sure exactly why that is, but it was a stark difference. Florida has a lot of migration of adults. They have a rental or they have to buy something because it’s reasonable. They are building houses that are worth $230 that you put the 3 percent mortgage rate on that, and it’s a pretty amazing payment.

In the flipping space when it comes to death, disease and divorce, this is a really interesting play. You might be dealing with as a local real estate investor with all three of those categories at one time in some of this stuff. Aaron asked everyone to be very sensitive to that. Please don’t send weird marketing to people about Coronavirus. As far as the Wall Street versus Main Street, he thinks it’s gonna be a really neat time.

Next up was tennants, toilets and trash, the three TS. Aaron asked what impact this could have on rentals and rents. The state of California has already been talking about an eviction moratorium. On the resources Web site, he has some tools for you as a landlord to be communicating with your tenant. You better really be careful what you say and don’t say to put yourself at risk. Just be very careful. Aaron asked Bruce what he thinks about the tenants and rentals in the foreseeable future for California? Bruce said he and Aaron both have their ideas. The difference between us and them is they might be one eviction away from being homeless. A lot of us have spent our life doing math and calculating our cash flow and our net worth and all that. The next 60 days or so isn’t the time to do that. He thinks the laws are going to come in place where you can’t evict people.

Bruce just had a really happy surprise. They were still considering to go going to Maui, and about three days ago he just decided it just doesn’t make any sense. He was supposed to show up Sunday. With five days notice, he said he can’t come. So whoever owns that condo obviously isn’t going to get that revenue. It’s an oceanfront condo and is not expensive. The property manager obviously was involved in it, but they already knew what the response was. The asked Bruce if he wanted it for another time. He said yes, he had already checked his schedule and can do it in November. Without charging him a dime, since it was all prepaid, they just prepaid the November one. So that guy is out a chunk of dough. He didn’t have to legally do that, and Bruce wouldn’t have been shocked if he did it. He just understood it. But he didn’t do that. Bruce said he will rent that guy’s condo till he is not here. People are going to have a really good memory of how they’re treated right now. They really will. You want a great set of tenants, treat them honorably in the next 60 days. They will not forget it.

People won’t always remember what you say, but they remember how you make them feel. Now is a good time for the good feels part. Aaron is reaching out to all of his property managers, setting the expectation on that. He will reach out to the tenants that he still individually manages today and ask how they’re doing and where they’re at. He was glad he did some 1031 exchanging. His tenants in Florida are very different caliber wise than what they’ve been in California. Aaron was glad he diversified.

Bruce said in Leesburg, 90 percent of his tenants are nurses. They had a conversation on the Florida Bootcamp call yesterday, and they talked about that. He talked to Joanna and told her to please reach out to clients, and she did. She sent an email. The majority of them are getting government retirement income or they’re in the health care industry or military. So she really didn’t have a lot of worries. But as a landlord, you just sort of have to prepare and map out how you’re going to deal with the fallout and the ramifications.

Oftentimes you don’t live in the county where you are investing. So, Aaron tells people anywhere they’re at to just go to Google and type in 211 and the county that is going to be your local health and human services hotline. In times of emergency, it is the backup to 9-1-1. Aaron happens to be the board chair of the one in Riverside County. He says to please don’t call. They do have operators that can speak several different languages. The one in Riverside at least has access to a language bank with over 100 different languages. In Riverside County, they have over 100 Health and Human Services, government, nonprofit resources for people. The goal is to always give people the local resources as close to them as possible. So it’s just a really cool resource, but they have a database. So if you’re talking to a tenant and they’re struggling with something, maybe you can do a little bit of legwork and homework close to the property and find some resources to give them and just be a real asset to your tenant. It’s just a good resource.

All that stuff is online as well on thenorrisgroup.com/resources page. It’s towards the bottom. Aaron has listed up top the national resources, the state resources right below that, and then below that a little bit of local stuff. When it comes to the school districts and health departments, those are countywide. You just need to do some homework and plug in quickly to those and find out exactly where the media is getting their sources so you can forward to tenants that instead of allowing the message to be couched through some kind of media. Aaron is still a little bit disappointed in some of the headlines that he sees the media play into. He gets it. It’s the game. But, he doesn’t want to scare his tenants more than need be.

The next part of the interview focused on questions from their VIP subscribers. This is what they plan to do in the foreseeable future. They will have all the updated information, and then they will be able to put the information out on the podcast within a day’s turnaround for the weekend.

The first questions was about California versus Florida and whether Bruce still believes in that move. He said he is very comfortable with that. This is an emergency situation, so he can tell you one thing about Floridians. Every year they have the chance of a hurricane. They know how to hunker down, and they’re prepared. His buddy Alex has a generator and a food supply, and he is not unusual. So Floridians know how to isolate. They’re forced to because if you have a bad hurricane, you have road problems. This is not unusual for them. He thinks it corrects itself very quickly, and he thinks this is nationally. He thinks we are gonna go through a very tough 60 to 90 days; but if we do this correctly, we’ll be on the other side of it and both states will be fine. He just prefers Florida as a landing place. There is no doubt in his mind that in the next 10 years, Florida will be the number one destination of adults migrating. California will literally have no gain from migration of adults. That’s why Bruce is there. The people going there are people with wealth that are older and just require services. Ut requires more migration of health care workers. 20 percent of Florida is over 65. Are they in more danger than percentage wise in California? Yes. So that’s the one thing that you have to think about in the next 60-90 days. You want to make sure that those people take care of themselves and stay as much as they can on their own. There are a lot of mobile home parks. You’re isolated in a sense that you’re in your own residence, but we will see.

However, if he had a choice and had a free ride for 24 hours, he could exchange all his stuff in Florida and go back to California. However, there is no way he would ever do that. The Norris Group has been having conversations for several weeks as soon as this started with theirr builder being exposed to things like supply chain where you really think through the entire process and where you would get stuck. They are doing some really complicated 1031 exchanges. Aaron asked one of them if he buys supplies from China, which he said he doesn’t. Because of the tariff wars, they get really switched over and always try to buy American where they could anyway. They have extremely limited exposure. They buy one light fixture that can be easily changed out, which is reall good to hear. The next one is 1031 exchanges. The IRS has yet to extend that, and he thinks it’s just a matter of time. However, that’s good to know for them as a company. As they are quarterbacking these transactions, they’re pretending that that’s not going to change and they are documenting everything as we go along. So as of now, Florida is not shut down. As far as caseload, they’re a couple weeks behind where California is. He thinks that’s going to change pretty quickly.

Bruce doesn’t have any doubt that a 1031 one exchange extension would apply in this circumstance, whether it comes from an edict for national or you just have a transaction that’s obvious. California just got told to go home. Bruce just had an arm wrestling match this morning with a guy that was supposed to show up to work at my at his house. The electricians are going home, and a part of it could be their suppliers are just shut down, so where are you going to get that conduit? You’re not. You just have to be patient. As far as 1031 exchanges, he doesn’t think you need a national proclamation. You document your particular case, and all of a sudden there’s a 60-day stoppage for this. He doesn’t think anybody will say “Oh, no, we’re gonna penalize you.” That would make no sense at all.

They’ve already extended the tax deadline to July15, 2020. All that information is on the resources page. Aaron sometimes gets asked what tools they use. They have gone very digital over the last five years. Part of Aaron’s job is preparing for weird things. They use Jive VoIP, which has been awesome. His team has already gone remote, and they are planning on doing it next Monday as a test. That makes it really easy, and they’ve been a great company to work with. As far as office tools, they are on Office 365. This has been one of Aaron’s favorite resources as a small business.

For those in the real estate industry, just be very aware when you have your teams logging in through computers where they’re not remoting into your office, you lose control. If they’re using their own personal laptops and they’re opening up their email and there’s financial data, just be extra cautious and really think through if they are handling personal information from clients. Aaron doesn’t even like his team using their cell phones. He doesn’t want them to have that exposure, and he doesn’t want it as a company. So whenever possible, they’re remoting into the office because they are then technically behind the firewall of the Norris Group and all the different things that they have put in place. They have a great technology team that they’ve outsourced to. They’ve been incredible. But if you ever need any help with tools, you can always email Aron and he will help you nerd out on that.

The next question was if there are any particular areas in Florida that they like better than any others or places they would stay away from. Bruce said in Florida there’s a fair amount of remote towns, which he would not do. He doesn’t have to be in Orlando and Tampa. How they chose the areas they chose is that if you ask questions about, for example, the migration of businesses or people or places to retire, Florida has a great majority of them. Their area is one of the dominant areas and the highest, highest numbers, one and two in a lot of those categories. That’s how they chose there because he is looking at keeping his for a long time. So he would like to go where the growth is going to continue and accelerate. That’s how they chose. He not an expert on Florida, so he can’t even imagine how long it would take to get ot know the area. If you flew into California, how long would it take you to know the difference between Riverside and Rubidoux or Riverside and Orange County, or Orange County and Stanton? There’s just a lot of nuances there. Fortunately, that’s why we’re locked into a team that knows that like the back of their hand.

Aaron recommended this also as somebody who’s not transaction-oriented and who is relationship-oriented. He has definitely had that experience here in Florida with both, and it makes a big difference when you can trust the person on the other side and have a conversation about your overall strategy and what you’re trying to accomplish. It’s the difference between them trying to send you into a very rough lower socioeconomic area where the cash flow is great. That’s what they hear you say. But what you’re really wanting to do is talk about safe, boring, moving money long term in an area that has potential. You know, if you don’t phrase it right or they don’t want to tell you that, they’re going to send you something you might not want. So, yeah, just be careful going into areas. There’s plenty of great spots in Florida, but just make sure you have a good team.

Another question was in regards to the county of L.A. including residential construction as an essential business, so they are continuing to move projects forward. Aaron didn’t disagree. He thinks there might be some confusion. The shutdown only happened after work hours, so Aaron is sure everyone’s scrambling today. There was a sense of complacency in California. People just didn’t realize how seriously they were going to do this, and there wasn’t a whole lot of notice that this was going to happen. There was lots of confusion today. Next week, we’ll have some more clarity, and he thinks they’re going to refine what the essential businesses are going to be and it’s clear that they don’t want those economic engines to stop. He agrees construction is going to be a priority.

The next question was which recession had high unemployment, but median home price didn’t go down and saw a speedy recovery of the economy. They wondered if this is possible? Bruce said in the 80s, you had a crazy bunch of bad charts, and prices of real estate didn’t go down. That was in 1980-1981 where interest rates went to crazy numbers like 15-17 percent. We haven’t had this one in our in our lifetime. If Bruce had a chance to ask Raoul Pal again about a depression, Bruce thinks he would look at a stock market loss between 60 and 80 percent of being a depression. You might get into that range, but you may also blow out of it six months later and be up quite a bit. So this is different because this is really a cessation of everything that we do for what could be a short period of time. If this extends past six month, Bruce isn’t sure what would happen since this is off the charts. He doesn’t have a chart for this one. We don’t have a blueprint of “go home and stay there for as long as we tell you.” He thinks the shorter, the better, and what we’re doing allows it to be shorter. If we just do our normal lives, it looks like this could affect high percentages of every population, of every country. So we’re doing what we need to do. Bruce said he would rather hurt in place for 60 to 90 days and get through it than make it last for a long period of time and have really bad effects. So I think we’re being asked to do with what’s intelligent.

Aaron hopes people listen. Maybe it just wasn’t clear how urgent it was. Aaron doesn’t thinnk they have been able to catch up with the testing, so the headlines are just gonna be ugly for the next week or so until they can finally catch up and really get the understanding of the scope. Aaron is so glad they’re doing this. He thinks it’s going to help a great deal, at least to slow it down and help the curve go down.

In 2017, Bruce wrote 2 Percent Mortgages, $40 Trillion in Debt And Other Surprise Endings. Last month we’ve got the 2 percent mark. Yesterday, the Treasury yield for the three month Treasury actually went negative. People are disappointed. Aaron is in the middle of a mortgage transaction, and his rate actually went up because he was not logged in. The lenders are basically saying, “holy cow, hold on, we can’t keep up.” And the markets are just in a little bit of a terror. Aaron thinks that will free up. But the $40 trillion in debt looks like could be ticking pretty quickly. As far as the response is, first round is over $1 trillion.

What would what this is about is looking at economic damage. The projection was always that inside of that 10 year period, we’d have two recessions. We’re going to have a very large recession with a very large debt. The fact that that’ll turn out to be close doesn’t make him happy. None of that prediction was about being happy, that’s for sure, and not this way either. However, it’s a reality. We’re going to step up and do whatever we can.

Bruce thinks there’s no reason for the mortgage rate to be this high. There’s no reason for it to be over 3 percent. It should be between 2 and a half and 3 percent. There’s a lot of things going on right now, but he thinks the Fed is going to step in and allow for that market to be freed up and for rates to go back down. There’s no reason for you to have something four or five percent right now. Completely ridiculous. It’s definitely one of the things they can do to help.

Vickie asked if this is going to cause real estate values in California to plummet, which Bruce said no. What causes real estate to plummet is a massive percentage of foreclosures participating in the sales. Well, you just know that’s not going to happen. First all, they just did a moratorium on foreclosures. Bank of America said you can skip your payment in certain circumstances. There’s no way a foreclosure process is going to race through and create a bunch of inventory for sale in a timeframe that we probably have. What happens is if you look at sales, they’re going to fall off the cliff. The sales that happen maybe were urgent sales or maybe it was unnecessary sales. He has been there where he asked himself if it was worth selling at a loss or break even to get liquidity. In his particular situation right now, if the answer is yes, then he wouldn’t look back. He would do it. That’s where our business is actually going to be helping people. If you buy a house in a 30 percent discount and somebody has owned it for 30 years and it has gone up eight hundred percent, he can’t feel bad about that at all. He thinks that’s a service and that side of the business actually will have a leg up and that we will buy more wholesale deals providing a service for people that can’t get liquidity like they normally would.

The buying side probably would go up. That would make perfect sense to him. Unfortunately for stocks, you can look at the damage by the minute. Real estate will be much slower moving. Because we don’t have foreclosures, you’d have to have individual decisions in mass to discount stuff. He doesn’t think that’s going to happen. Sales are going to slow to a crawl, and anybody that doesn’t have to make a decision will just wait. That’s what it feels like.

Julio asked about some opportunities for three different flips. He asked what concern he would have with people getting hard money from lenders. Aaron right now it really depends on how the lenders are structured. We remain one of the only lenders around that does whole note investing. They only work with one lender at a time typically when we’re creating a note. If some lenders were brokering and they were relying on some of these Wall Street lenders and they were relying on lines of credit, they might cease. If you’re not working with a local expert, hard money lender that knows the market, has a little bit more control, and can be honest with you about expected closing times, LTVs, and things like that, you’re probably going to run into some issues and Aaron would hate to see people get ghosted. So just be aware that’s a reality and it’s something that you really have to be careful with.

The next question regarded if you were doing a flip what strategies you could use to make it sell quickly. Bruce said there isn’t one. When you want to sell it quickly, you could lower your price and sell it like a wholesale number to somebody. He doens’t know that he would intentionally put himself in that position. If you’re in that position, then fine. Change liquidity with one house to make your whole package of home safer. That’s fine.

However, could you try some strategies like paying the sales agent 6 percent, or could you rip up all those things? He doesn’t think you’re going to get the majority of people to act right now. We’re just frozen, so don’t expect to get full retail if you also have a timeframe attached to it and you have to sell it. That is probably not going to happen. Another piece of advice is don’t into transactions if you don’t have a plan B. You can’t turn it into a rental. Maybe think about the co-living strategy, renting a room. Definitely create a plan B.

One of the things they have talked about over the last couple of years is when you’re doing the property flips, only get into projects that have an exit that’s other than having to sell it. Have at least a survivability process where if you have to rent it, be in a price range that’s bearable too in case you have to hold something for a while.

The high end market has already been struggling with this virus. The months on market was lingering as is. Aaron wonders if some of the wealthy in America are going to actually dive into real estate to park some cash because maybe they view it as a safer place than stocks. For years, there’s been a play of bond deals going low and if you know how to play that, it’s very profitable because you’re tying up something at 3 percent that goes down to 2. Well, there’s a spread there, obviously, that you can make a profit on, and that’s what they do. Well, now it’s basically zero. That’s done. For all of these bond holders, that game is pretty done. Bruce thinks a lot of that money will go into real estate because that is an asset that pays a return.

Michael asked if more banks will defer mortgage payments. Aaron definately thinks they will, and you’re gonna have to watch the state as well. During Dodd-Frank, they released that, so we had some federal guidelines. But then the state of California said not good enough, so SB 978 came out. For us hard money lenders, it added a whole layer on top of it. Just be careful and watch both the Fed and the state conversation. Watch the difference between the FHA and the GSE products as well as the private side.

Aaron wondered if the same protocols can be foced one private lenders like the GSEs. Bruce said simultaneous to anything they dream up is they’re also talking about giving $2000 a month to each adult and a thousand dollars to each child in a family. So they could, in fact, make their obligation. So you’re gonna have both sides going on, you’re gonna have a lender rule saying, you can’t foreclose, but you’re gonna be quite possibly handing pretty substantial money to families where they can make their bills. He thinks we just have to be patient and wait, and this will play out. He doesn’t think you we’re talking a year for this to get better, but 60 to 90 days before at least we can see the light at the end of the tunnel and head in the right direction.

Another person asked how as a rental property owner they should respond to tenants saying they can’t make rent while we have loan payments to make. Bruce said that’s a real issue. If it’s somebody you rented directly to, what’s to have an honest conversation. If they’re getting compensation from the federal government that should allow you to be paid, you oughta have an honest conversation and say that that’s not an unfair expectation. You’re not going to be able to evict somebody. You need to be reasonable. That’s just the truth. We’re all going to have to say, “OK, we have to look at this as a team.” You really are. If you try to throw your weight around, it’s only going to be resented. It’s not going to work out well. .

This is a once in a lifetime thing. Who thought that this would occur? But again, you might have moratorium on your payments. That might, in fact, work. What if it’s a 90 day pause? You don’t have to pay rent, but I may have to pay payment.

That was actually the next question. Would we as a hard money lender follow B of A by adding payments to the close of escrow? Bruce said that would make sense. Most of us most of the hard money loans are usually on flips. That would make perfect sense that wejust for bare the monthly payment until that can be continued and stick it on the other end and call it a day.

The Norris Group has already been looking at that with their technology provider if that needs to come up. Aaron’s expectation is the golden rule: if you can, you should. Keep going on the other end. We’re not working with a line of credit. We have real estate. Some lenders are relying on this income as well. So if you can, you should. If the borrowers need help, give us a call early and let us know what’s going on. Avoid ACH late payments. Everyone just needs to be engaged and flexible.

Bruce ended by saying we’re going to get through this, and we can get through it really well by thinking about working together as a team. People are looking being American more than being a Democrat or Republican. We’re getting that feeling back. As John Mauldin said, we are fighting a war. We can’t just think outside of the box. We have to get out. This isn’t even a normal box. This is a once in a lifetime event, and Bruce wants to be proud of how we treated the people in their circle when it’s all said and done.

You find out pretty quickly who you’ll never work again with after the fact, too. So you find out exactly who people are in this process. Bruce will have a good memory on what happens in the next 90 days.

This is the plan for Friday mornings now. If you’ve got extra resources that should end up on the resources page, just email info@thenorrisgroup.com, put resource for Aaron in the subject line, and they will take a look at it. If it’s not already on there, they can add it. With that, everybody just stay safe. And looking forward to talking to you next week.

They are working on a real estate investor town hall coming up on the second Monday of April. They’re going to try to coordinate a very large interview that will feature Keystone CPA with an update of where we’re at in a couple weeks. That will be appropriate by then. It will feature different real estate investor club friends from all over the state of California, from Northern California and Sacramento, San Diego, Orange County, L.A., talk about how the different cities are reacting. So you’ve got the national, you’ve got the state, and then you also have the local response. It’ll be really interesting. And we’ll be able to dive in a little bit deeper as far as sales and time on market, and we’ll have a better idea of what that looks like in April. So hopefully we’re a good resource for you guys. If we can do anything different, just shoot me an email. Be glad to help out where we can and we’ll talk to everybody soon.

The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.