What Opportunities are you looking for?

Question

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?

Brian Adams · Answer

@Todd Dexheimer hope you are doing great!!

I am staying in my multifamily lane. I am looking for 200+ unit value add deals, with a motivated seller, solid in-place cash flow and a deal bought at a discount.

In my opinion, the key to getting these types of deals closed right now is to be ultraconservative on rent growth, very aggressive on expenses, have built-in cash reserves for the unexpected, have cash ready from investors, a trusted agency lender and a strong operating team.

This could be the best buying opportunity in our lifetime. I am working on my business right now to target and acquire 5,000 units in Atlanta, Dallas, Phoenix and some other markets.

Good luck to you.

Brian Burke · Answer

I'm staying in my lane--multifamily primarily, but also doing some distressed debt (because we have a whole team for this too).  I don't think this'll be the best buying opportunity of a lifetime, that was 2010 and I had a lot of fun back then, but there will be a few opportunities here and there resulting from this.  More likely is that things settle out to be less crazy.  Maybe the deals aren't that much better, but you don't have to put $250K hard day one and be in a bidding war with 20 other offers.

My guess is besides multifamily, the best asset class to be in is industrial.  As retail continues it's online shift, products go from storefronts to warehouses.  Shipping and receiving, transportation, warehousing, all of that should do well.  It's just a tough sector because of the specialty nature of the property, and not all that liquid.

I think retail is on shaky ground.  It was already sliding before COVID, and that is likely to get worse.  Maybe you can buy "deals", but what good is an empty building that won't rent at any price?  This opportunity will be very patchy, not widespread, and not for those with a weak stomach.  The best might be NNN drug store type investments, but those are just like buying bonds.

SFR, probably some opportunities here, but millions of competitors so it'll always be tough.  A few more foreclosures so that'll bring some opportunity but nothing like 2008+.

Todd Dexheimer · Answer

True. Pick one and focus on it. I'd say the only way to focus on multiple strategies effectively is to have partners/managers that focus on each niche.

Andrew Carlson · Answer

@Todd Dexheimer A lot of good strategies. It might be hard for some people to not get distracted by all the shiny objects out there...myself included!

Marielena Salazar · Answer

Thank you for the response. I am very new to this, so every little of info helps.

Ramon Flores · Answer

@Marielena Salazar It largely depends on your finances. If you have enough money and if you know you are going to live somewhere for more than 5 years then I recommend buying your first home. You will receive a lot of tax benefits that will easily offset any cash flow you will be getting from a rental property. Plus you will build equity and hopefully make money when you sell your property. Hope this helps!

Marielena Salazar · Answer

Buying an investment property before my first home, Any recommendations?

Todd Dexheimer · Answer

@evan polaski Staying focused is important. My focus is buying value add real estate. If there is an asset class that I am not an expert in, then we bring in experts. We remain focused on value add. Analysis and underwriting remains the same, value add implementation remains steady, raising money and financing is still present. The main difference is in the operations, so if you can fill that hole, you'll be good

Evan Polaski · Answer

@Todd Dexheimer, I agree with your assessments.  There will be some opportunities for sure.  But as the others mentioned, staying with what you know is the best way to continue to grow with the least headaches.

That being said, mixed use is growing in interest to me, but I worked in retail real estate for 5 years, and residential for 9 now, so I feel like I have a certain level of over confidence in myself.  :)

Alex Olson · Answer

@Brian Burke I think you are right. People will always need a place to live and as houses get more expensive apartments become more attractive. Also industrial warehousing will be huge. Food and entertainment will come back.

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