Pandemic opportunities coming down the pipeline

[Todd Dexheimer]

I love Multifamily, but also am open to other investments. Right now I’m looking for opportunities and see some potentially fantastic opportunities out there.

1. Retail: retail is getting smacked around right now. Not only has e-commerce already put negative pressure, but now COVID has shut down many small retail shops and nearly all services based businesses occupying retail centers. Many serviced based businesses will need to break their lease, but new ones will eventually come back in. Buying retail during that spread will be valuable.

2. Single Family: single family may suffer a bit from foreclosures and short sales, but once that hit is over, I see it coming back with a vengeance. Millennials are going on a shopping spree. Being locked down in their high rise apartment downtown with all the amenities shut down will drive them to want to have a house and yard. This allows them to socially distance with out being shut inside completely. Millennials remembered the Great Recession. Now they will forget about that and remember being locked up during COVID.

3. Businesses: many owners will retire early, giving up because of this forced downturn. Others just didn’t have reserves to get through a month or 2 of being shut down. Buying distressed or undervalued businesses, especially that own real estate will be a great strategy. Also, some owners will owner finance and stay in the business as a manager. 

4. Vacation rentals: Vacation rentals are getting hit hard all across the country. These are being sold or turned to long term rentals, which opens the door to buy distressed vacation rentals or buying a property and turning it into a vacation rental.

What else do you see as opportunities coming out of this pandemic?

[Joe Splitrock]

@Todd Dexheimer 

The key thing I see is understanding the "recency effect" of any disaster. People attribute the most weight to their most recent memories. After the stock market dumped in 2008 and housing crashed, people were cautious of both for years. After 9/11 people didn't fly planes for months. If you get in a bad car accident, you are scared to drive for months. It is actually irrational beliefs, because everyone knows the best time to buy stocks is after a crash. The best time to buy a house is when prices are low. The best time to fly on an airplane is after security at it strongest ever. And statistically getting in one car accident, makes it no more likely you will get in another. It is really irrational thinking, but it does effect the recovery speed of some industries. 

So it is not just about buying assets that are driven down in value currently, but anticipating how fast they will recover. I like your ideas. Here are my thoughts:

1. Retail: I would be very careful. Unless you are getting a strip mall with businesses like a coffee shop or hair salon. Larger retail spaces will never come back. Online purchasing has been slowly eroding retail and this is just one more nail in the coffin. My concern with retail is the excess inventory could push rents lower. Office space will converted to retail as office space demands decrease, creating even more inventory.

2. Single family: I see only upside here. There will be more demand for single family homes. Too many people right now are trapped in apartments and they are freaked out. This virus and stay at home orders are showing people that being tightly packed into urban areas can be dangerous. I see demand shifting from multi to single family and even shifting out of urban areas. Keep in mind one reason people live in urban areas is proximity to their work place. Even those who live further away will not want to go back into the office. How many commuters in NY or CA will want to sit in traffic for 2-3 hours a day after this is over? With everyone working remotely, it removes this chain that binds people to urban areas. Employers will let some segment of their work force stay remote permanently and they will capture the cost savings in reduced office space.  People will want a nice home with an extra room for an office. 

3. Businesses: Great thoughts on this. I figured businesses would go bankrupt, but as you pointed out some will choose to exit. Buying an existing business has massive long term value, but short term performance will drive the sales price down. I could see older people willing to cash it in. The key is buying the right business that has good long term prospects.

4. Vacation rentals: This will be one of the biggest opportunities, because the long term damage here is painful. Even after the economy opens up, large gatherings will be prohibited for months. How do you hold conferences, go to large hotels or attend theme parks with thousands of people with the treat of a fast spreading disease still out there? This is bad news for Florida and Las Vegas in particular.

I like Steve's suggestion of Senior housing. The current crisis is hitting seniors hardest and current owners are dealing with issues because of this. It honestly makes senior living very unappealing at this time. But long term people will always get old, so there will be demand. 

This is the most constructive forum topic I have seen since the virus hit.