So, the topic on EVERYBODY’S mind is the Coronavirus and what it all means. In truth, nobody knows for sure! However, listen in as I share some of my own thoughts around our social and personal responsibilities, as well as some of the potential second and third-order consequences as landlords, investors and developers. There also room for an upbeat outlook for potential opportunities as well, so not all doom and gloom.
Recorded whilst self-isolating awaiting my own test results has made for an interesting perspective...
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Transcription of the show
So, the topic on EVERYBODY’S mind is the Coronavirus and what it all means. In truth, nobody knows for sure! However, listen in as I share some of my own thoughts around our social and personal responsibilities, as well as some of the potential second and third-order consequences as landlords, investors and developers. There also room for an upbeat outlook for potential opportunities as well, so not all doom and gloom.
Recorded whilst self-isolating awaiting my own test results has made for an interesting perspective...
Property Chatter
Hello, and welcome to another episode of The Property Voice Podcast. My name is Richard Brown, and as always, it's a pleasure to have you join me again on the show today. Well, today might be quite short, but probably the topic that's on the forefront of everybody's mind and the tip of our tongue is the coronavirus epidemic, or pandemic actually, sorry, and the potential consequences and fallout as a result of that. So I'm just going to talk about that a little bit. It's quite ironic, as well, that I'm talking about it, because I'm sat here in self isolation myself. I suspect that I have some symptoms, and I went to be tested over the weekend, and I still have some symptoms now. The results take three days to come through for the coronavirus test.
So, as I actually record this, I don't know if I have the virus or not, even if I don't have it now, I guess there's a risk of getting it in the future. Everybody is, I'm sure, got an eye on the news and the updates, and watching what's going on there very, very closely. So yeah, so wish me luck, let's see how it goes for the rest of the day. But I'll be in isolation, for self isolation for seven to 14 days, I imagine, regardless. So there we go.
But essentially, I wanted to talk about this, the implications of this virus really. And I guess, first and foremost, we have a responsibility to be good citizens don't we? So, I personally didn't really understand all of what was involved with this virus when I first started hearing about it. I must admit, I was probably in the camp of downplaying its seriousness and thinking it was something like the flu, and would just pass relatively mildly, but there's some pretty significant consequences from people catching the virus, and it's extremely contagious.
It's an exponential growth curve in terms of the number of infections that are being passed around, I think each person infects at least two or three people. So you can quickly multiply the number of infections over a very, very short period of time. And as I record this, I think we are maybe a couple of days or a couple of weeks behind Italy, which is the worst in Europe certainly, and the worst affected in Europe, closely followed by Spain. But all of Europe and the US, and everywhere pretty much, has been affected by this virus.
Now, if you get the virus, and I feel like I've got something, let's put it that way, it feels like a very heavy cold, and I've got fever, I've got a temperature, I've got a headache, I've got a very mild cough, not a large cough, and what's the other thing? A sore throat, yeah, so the other thing. So, it's like a cold or flu-like symptoms. I suppose the fever is what brings you down, it gets very hard to function when you've got the fever, so I've been treating that and getting it down, but waiting for the results. Hopefully it comes out clear, but if not, we're going to deal with it, it's just one of those things.
But it's the contagion isn't it, that is making everyone a bit spooky. And it's not just the contagion, it's like, when the common cold passes around everybody gets the cold. The consequences and not necessarily that significant. But in this case they actually can be, can't they? So, there's 20%, I believe, of cases of infected people that require hospital treatment, and roughly 5% of those need intensive care or a ventilator to actually stay alive, in fact. And that's what explains the death rate, I think it's 3% or 4% overall.
There's a lot of mystery and false information going around about the statistics. I'm going to share some links in the show notes to some articles that I've found very helpful. They're not necessarily coming from the mainstream, and I think it's good to check your facts and understand what you've been told is correct, and also what you can do about things. But essentially, yes, it's very contagious. For example, the virus can live on door handles and things like that for apparently up to nine days. So, okay, if you cough and it falls onto the floor it probably dies, but things like plastic, and ceramic and metal, those sorts of surfaces, bathrooms and public places, generally speaking, are a hotbed probably for the virus to manifest.
So yeah, it's extremely contagious. We need to do the sensible things, so for example, washing hands, but I think it's probably gotten to the stage now where we really do need to self isolate. And that means protecting one another from passing on this infection, and in particular the elderly. So I guess, really, there's the health aspects, the being a good citizen aspects. But is it really a health scare? Well, obviously it is, first and foremost a health scare, and of course, it's only right and proper that we do the right things to protect one another. Self isolation, as I mentioned, is probably the only realistic way to go now. But there's a number of consequences attached to that isn't there?
So, not only the health issues, we're seeing whole regions being locked down. We're seeing large gatherings being stopped, we're seeing travel bans, we're seeing workplaces being emptied to try and stop the spread of this infection. But of course, not only is there a health issue, there are also economic issues as well. And, I guess I just wanted to focus on that, because obviously I'm not a health professional, so I can only give you some pointers to some good articles that I've read and just talk about personal experience. But, I really want to just pick up, in the second half of this episode, some of the potential second and third order consequences as I like to call them.
So, obviously we've got the health issues, and we're trying to contain this virus, and we're trying to limit the spread and protect people from serious illness, or even worse. But then, let's just start to play this scenario through. Businesses are not taking people into the office, that means productivity is probably going to fall, revenues are probably going to fall as well. Profits of businesses are going to fall, they're going to be in trouble essentially.
Only today, as I record this, Boris Johnson has basically said he'd rather people didn't go into pubs and clubs and social settings, and reduce the restaurant occupancy by 50%. The airline industry has been absolutely decimated, of course, with travel bans and people just choosing not to travel. Now, obviously we've had the oil price crash at the same time, so that's a double whammy, and we've seen the stock market take a tumble. So these are pretty well uncharted waters. They're not uncharted insofar as we've had economic setbacks, but they're uncharted insofar as how it's happened.
And, of course, a few months ago I did talk about black swan events, and I guess you'd describe it as one of those, wouldn't you? But the thing is, I guess as property investors and developers, there's some consequences that we need to be mindful of as well, and maybe there's some things that we need to keep in mind, and there's some mitigants that we can put in place as well. So, tenants are maybe going to struggle with their earnings. So a lot of people won't be able to work the hours that they used to work. And if they're on an hourly based, a time based contract, of course their income is going to struggle, that's going to put pressure on them to pay their rent. So if we're landlords, we might have tenants who are struggling to pay rents to us.
So, I'm expecting to see some arrears arising over the next few months, obviously, as people are struggling to make ends meet from that point of view. Then, of course, we've got things like depending on your property strategy, so that would be sort of a buy and hold type of strategy. If you're a flipper, you're property trading, you might be in the middle of a project or about to come out of a project and put your property on the market, but is anybody going out to view it? What is the competition like? Are you likely to sell that property on? I don't know. So, we're in, again, uncharted waters.
So, I guess, if you're also a developer, now you've got pretty, if you're in the middle of a project, I'm in the middle of a number of development projects, and so the costs of that project could be extended potentially. So you could have people not going to work because they don't want to associate with other people, therefore, that could drag the time out unnecessarily. You might have carrying costs over that period of time. You may need to incur additional expenses during the development period. And of course, come the end of the development if you are going to sell those properties on, will they sell? If you're going to refinance them, well there's been a little bit of good news obviously on the financing side with an interest rate cut.
Whether that actually makes its way through into real mortgage rates, it remains to be seen, let's hope so. But you know, obviously a base rate cut, back down to the historic low of a quarter of a percent is welcome, a boost at this point in time. But I think, really, the biggest issue is all about liquidity and having contingency plans, and indeed, funds available. I think we're probably going to have to expect that we might take a bit of a hit in one way or another over the next few months, so we need to be prepared, and that means putting measures in place. So, for example, having a contingency fund so we could buffer ourselves against two or three months rent, unpaid or short paid from tenants who are struggling.
Perhaps we can negotiate a moratorium, like a payment holiday on our mortgages with the lenders. I believe some lenders are being quite sympathetic to that idea of putting the mortgage payments on pause, deferring interest payments for a period of time, that's maybe something we can do to help bridge that gap. We should try and have funds set aside if possible, so liquidating assets and converting hard to convert assets into more liquid or cash based assets so that we can respond to events. We should try and fix our interest rates, and as long as possible probably, in this period of time, or get extra financing in place to have a bit of a buffer to survive a bit of a difficult period. By all intents and purposes, it probably looks like well into the last half of the year before we see the end of this particular crisis, I suppose you might call it.
So, I'm not trying to alarm anyone, I'm not trying to stoke any fear, but I am trying to make sure that we're prepared. So this is happening fast and things are changing very, very rapidly, and we need to be prepared for that. So, that's the sort of mitigation side of things and the contingency side of things, but equally, there's an opportunity side of things too. And I think, as Warren Buffett said, "Sir, to be fearful when others are greedy, and greedy when others are fearful." Well, there may be opportunities here. People might be struggling a little bit. There might be opportunities to bag a bargain if you have cash on hand. So there's the flip side to it too. So perhaps being ready to take advantage of a market drop or a lack of competition, or something like that is also something worth considering as well.
So yeah, I didn't want to speak too long as you can probably, not if you can tell, but I feel a little bit bunged up and not in the best of spirits. So I just wanted to do a short update today. Talk a little bit about the C word, as it's called, the coronavirus, or COVID-19 virus to give its correct derived name, if I could say the word. And just share some of my top of mind thoughts with you. I've obviously, going to be looking at my own cashflow planning, some of my own contingency plans and just revisiting some of my own developments just to make sure everything's going to be okay.
But a bit of uncharted waters. Just take care out there on a personal level. Take care of one another, be a responsible citizen, but equally, look after your business. And there may be an update in the future about support that might be available to businesses going through a struggle. Let's see if there's going to be any government assistance, but everyone's looking to everyone else. Who's going to pay my mortgage? Who's going to sort out my business if I've lost money because I can't work or I can't do my business?
So watch this space. There may be more updates over the coming weeks ahead. Maybe I'll return to the topic later. But for now, I just wanted to leave you with some thoughts. Sorry it's not the most upbeat and positive podcast I could have shared with you, but as you can tell, I'm right in the thick of it myself. So, wherever you are, stay safe and keep your business in check. And I guess, just have a look at the website, thepropertyvoice.net, if you want to see any show notes. Drop me an email, podcast@thepropertyvoice.net, if you want to reach out to me about anything from today's show or indeed anything from property investing more generally. But I guess, all that is left to say now is thank you very much for listening once again this week, and until next time on the Property Voice Podcast it's ciao ciao.
That's all from me this week, remember if you want to talk about anything from today’s show, or just talk property investing more generally, email me at podcast@thepropertyvoice.net, I would be happy to hear from you! The show notes can be found at our website www.thepropertyvoice.net
Thanks very much for listening again this week, so all that left to say is ciao ciao!