The Income Opportunity My Kids Are Cheering for
“Dad, what are we doing for spring break this year?”
With the weather getting warmer, and sunshine this weekend, my kids are starting to look forward to their next break from school.
Plus, now that I’m just a week or two away from getting my pilot’s license, hopes are high that we’ll be able to fly somewhere fun.
So after some prodding from the kids this weekend, I reached out to a friend of mine who is in the vacation business. My conversation with Matt got me thinking about a special income opportunity you should be thinking about — especially now that coronavirus fears are on everyone’s radar.
Today, I wanted to tell you about this idea, and explain why this spring is the perfect time to be setting up this income stream for yourself!
A Perfect Storm of Opportunity
Unless you’ve been living under a rock for the last few weeks, you know that coronavirus is on everyone’s minds.
The virus has swept through parts of China, leaving thousands of casualties and many more in harm’s way.
The world is responding with travel restrictions, quarantine procedures, and a general sense of uncertainty.
Of course, our financial markets are not immune… stocks dropped sharply last week as investors worried about the virus shutting down factories and stores, and causing companies to lay off workers. There is a real fear that this virus could lead to an economic slowdown — or possibly even a recession.
No one has a crystal ball. And if anyone tells you they know definitively what will happen, you should be skeptical.
But smart investors always know that the times of peak uncertainty also coincide with peak opportunity.
If you know where to look and how to invest, you can often find some incredible deals that lead to reliable cash flow for years and years to come!
And that’s the exact type of play that my friend Matt alerted me to this weekend.
“If Coronavirus Hits America, This Spring Is Going to Be a Bust…”
Matt lives and works in one of the most popular vacation destinations in the country… sunny Florida!
“I guess the warm weather should keep you guys from having too much trouble with the virus,” I speculated.
“Yeah, but think about the rest of the country,” Matt said. “If people are getting sick in the Northeast, Midwest, and even places like Georgia and Tennessee, no one is going to want to travel to tourist destinations.”
He had a point.
Now, when I hear people talk about coronavirus cases in the U.S., I’m thinking about what that will do to attendance at places like Disney World and Universal Studios in Orlando Florida.
Not only could the parks see a sharp drop in ticket sales, but the local vacation rental market could have a terrible spring!
Matt wasn’t very optimistic about his income for the next few months.
But I could still hear a hint of excitement in his voice.
“But don’t forget Zach… In times like these, you can see property prices temporarily drop — giving us the opportunity to buy more rental units at a steep discount!
“Then, once things return to normal, we’ll have more real estate, more income, and as property values rise, more wealth!”
Matt is right! It’s the perfect time to start thinking about investing in vacation rental property. And perhaps the easiest time to get a transaction done!
That’s because of one other effect that we’re seeing in the market this week.
Lower Rates, Cheaper Mortgage Payments!
As investors were fretting about the stock market’s selloff last week, another important financial market was moving quickly.
U.S. Treasury Bonds were trading higher as investors moved wealth into this relatively safe area of the market.
Keep in mind, when bond prices move higher, their yields naturally trend lower. And today, the yield on the 10-year Treasury bond is trading near an unprecedented 1.0 percent!
Why is that exciting?
Because treasury bonds are tied directly to the mortgage market. And lower yields on treasury bonds naturally lead to lower mortgage rates. And right now, those yields are hitting all-time lows — just take a look at the chart below!
This looks like a perfect income scenario where vacation rental properties — especially those close to popular tourist destinations like Disney World or Universal Studios — could be priced at a steep discount.
After all, even real estate investors can get scared of things like coronavirus and park closures, and decide to throw in the towel on their properties.
Meanwhile, you can get a very cheap mortgage to help you finance these opportunities.
And then, once a vaccine for the coronavirus is found, and things get back to normal, your rental income should more than pay for your mortgage, leaving you with extra income and a great vacation property to visit.
A Word of Caution Before You Buy
While I believe this may be one of the best income opportunities of the year, I do want to caution you when it comes to a big purchase like a vacation rental.
It’s important to take your time and do your homework on any real estate you buy. You’ll want to know what these units typically rent for, and what kind of vacancy rate you can expect.
And it’s always best to be a bit conservative, in case your figures are a bit off.
And remember, it may take some time for the general population to get back to a normal travel mindset. Even months after a vaccine is out, some people may decide not to travel, which could impact your income.
It makes sense to always keep an emergency fund on hand. That way, if you have a few renters cancel, or if you’re not able to fill a few weekends on your schedule, the temporary loss of income won’t hurt you.
But with proper planning, and a little confidence, this type of opportunity could be a game changer for your wealth!
This week, I’ll be meeting with some of my contacts in the real estate and mortgage industries. And I’ll keep you posted on what I hear.
In the meantime, if you’ve got experience in the vacation rental market — or if you’re getting ready to invest in an opportunity like this — I’d love to hear from you!
Please send me an email and let me know what’s on your mind! You can reach me anytime at EdgeFeedback@StPaulResearch.com.
I look forward to hearing about your experience!
Here’s to growing and protecting your wealth!