Coronavirus and Multifamily Investing

[Courtney Buck]

1. Coronavirus and Market Instability

Many of you are aware that I work at the Centers for Disease Control (CDC), and I invest in the large (100+ unit) multifamily space. This puts me in a unique position to see how this crisis has developed. As I write this, the US just closed the border with Canada, and they stopped trading stocks for the fourth time in two weeks. There is a lot of incorrect information circulating for coronavirus, so for the most up to date facts, please visit: https://www.cdc.gov/coronavirus/2019-ncov/index.html

There is financial instability in the market due to concerns over the effects of the pandemic: businesses are closing, lots of people are not working, schools and other institutions are shutting their doors in the hope of slowing the spread. The markets reacted quickly and down nearly 30%.

There are other lagging behavioral factors in play that are not immediately recognizable. As a whole, when people are fearful and not as confident, they are less like to buy a new vehicle, book a vacation (obviously that's the case now), go out to restaurants, buy new consumer goods, and discretionary spending falls. The list is long, and markets react. While I do not advise on stocks, bonds, municipal funds, CD, and other paper assets...but if you are calling your financial advisor and they are not responding, find a new advisor. Have a plan in place, even if the plan is to stay the course. Now onto multifamily....

2. I am still confident in multifamily investing. Here's why:

Over the last three recessions (2008, 2001, 1990-1991), multifamily has performed well compared to other asset classes and single-family housing. With minimal default rates, steady occupancy, and rent rate percentages, multifamily (especially in the Class B and C space) has been a secure investment. One significant exception is during the dot-com bust in 2001; for example, San Franciso reported large vacancies and rent decline. It's primarily a one-industry town. This is one example, but I'm sure you get the point.

Think of 100+ unit multifamily real estate as a large shipping container vessel that is difficult to turn. It's stable, and it does not react quickly to change.

Bank financing is extraordinarily cheap, and the US Government does not intend to raise rates anytime soon. My personal thought is the rest of 2020 and 2021 will have low-interest rates.

Depreciation is a fantastic benefit of large multifamily investing right now! Bonus depreciation was increased from 50% to 100% for property placed into service after September 27, 2017, and before January 1, 2023.

And finally, affordable housing has never gone out of style. As single-family homes increase in cost, more and more people need affordable places to stay and raise families.

If I can help in any way, please feel free to reach out to me if you like, message me, and we can set up a call or meeting.

***All of these statements and recommendations are based on experience, research, and opinions of Courtney Buck and not of the U.S Government

[Greg Dickerson]

Originally posted by @Courtney Buck:

1. Coronavirus and Market Instability

Many of you are aware that I work at the Centers for Disease Control (CDC), and I invest in the large (100+ unit) multifamily space. This puts me in a unique position to see how this crisis has developed. As I write this, the US just closed the border with Canada, and they stopped trading stocks for the fourth time in two weeks. There is a lot of incorrect information circulating for coronavirus, so for the most up to date facts, please visit: https://www.cdc.gov/coronavirus/2019-ncov/index.html

There is financial instability in the market due to concerns over the effects of the pandemic: businesses are closing, lots of people are not working, schools and other institutions are shutting their doors in the hope of slowing the spread. The markets reacted quickly and down nearly 30%.

There are other lagging behavioral factors in play that are not immediately recognizable. As a whole, when people are fearful and not as confident, they are less like to buy a new vehicle, book a vacation (obviously that's the case now), go out to restaurants, buy new consumer goods, and discretionary spending falls. The list is long, and markets react. While I do not advise on stocks, bonds, municipal funds, CD, and other paper assets...but if you are calling your financial advisor and they are not responding, find a new advisor. Have a plan in place, even if the plan is to stay the course. Now onto multifamily....

2. I am still confident in multifamily investing. Here's why:

Over the last three recessions (2008, 2001, 1990-1991), multifamily has performed well compared to other asset classes and single-family housing. With minimal default rates, steady occupancy, and rent rate percentages, multifamily (especially in the Class B and C space) has been a secure investment. One significant exception is during the dot-com bust in 2001; for example, San Franciso reported large vacancies and rent decline. It's primarily a one-industry town. This is one example, but I'm sure you get the point.

Think of 100+ unit multifamily real estate as a large shipping container vessel that is difficult to turn. It's stable, and it does not react quickly to change.

Bank financing is extraordinarily cheap, and the US Government does not intend to raise rates anytime soon. My personal thought is the rest of 2020 and 2021 will have low-interest rates.

Depreciation is a fantastic benefit of large multifamily investing right now! Bonus depreciation was increased from 50% to 100% for property placed into service after September 27, 2017, and before January 1, 2023.

And finally, affordable housing has never gone out of style. As single-family homes increase in cost, more and more people need affordable places to stay and raise families.

If I can help in any way, please feel free to reach out to me if you like, message me, and we can set up a call or meeting.

***All of these statements and recommendations are based on experience, research, and opinions of Courtney Buck and not of the U.S Government

I agree multifamily is the best space to be in other than storage and mobile home parks. One thing to consider is that this is very different than any other situation we have ever faced. I was in the thick of it in 2009 and this is very different. Most Class C and D properties will likes see 50% drop in income during the lockdown until people are back to work. They are not going to use money from the government to pay rent they will use it to buy food and other necessities. Retail and office will be worse. 

Good news is banks are putting forbearance in place and working on contingency plans and are going to work with property owners unlike times in the past when they just foreclosed. If you or anyone owns property remember you have 90 days before you enter default so make sure to communicate with your lender and get ahead of things.