Where Would You Invest Your $ In RE If You Had $100M?
I've been asked this question during many interviews and looking to hear some perspectives given the current economic conditions.
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There's no correct answer to this question other than not having a well thought out answer with underlying data to support. Here is what I have prepared for future interviews:
As the globalized trading partnerships deteriorate, we can expect to see a rapid pace of near-shoring in the next decade and decades to come. Manufacturing is already being repatriated at a rapid pace and loads of capital is being allocated in domestic manufacturing plants, so industrial in the south where you would ideally be close to the border of Mexico would be the first place where I would invest $50m. The cost of labor in Mexico is now ⅓ of that in China, so there will be sustained motivation to nearshore manufacturing to North America to areas where there is an abundance of cheap labor
The other $50M would be spent on senior living and senior care centers as the United States population is aging at a rapid pace and by 2030 1 in 5 people or 20% of the US population will be 65 or older / roughly 76 million people, up from 16% today. And while supply is just barely adequate for the current demand, the future increase in the senior population is likely to catch investors on their heels in terms of being under-allocated in that space.
Thanks for sharing. Nice take on the senior care sector, if it's interesting the argument could probably be improved since the over 65 statistic isn't very applicable and it may be better to look at the Boomer generation instead. It seems that average age of residents is mid 80s and considering a decent length stay the intake age would be late 70s to early 80s. With the boomers turning 78 this year senior care should see strong demand in the coming years. This isn't visible in the over 65 stat since they are already over 65 to begin with.
Great answer though, might have to snag it so I wanted to contribute as well.
I'd lease a bunch of overpriced office spaces and convert them to coworking spaces, then use those to sell the idea to SoftBank and have them give me $10 billion. I would then sell the dream to more investors and take my golden parachute out to prosperity.
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ah sorry, I mis-read it as "what would you do if you had $100M". Still, my answer stands.
Personally, MF still makes the most sense to me, but it's very geographically dependent. Pricing has adjusted enough, and theres potential for distressed assets as 2021 people were taking 75-80% bridge loans with a 2 year rate cap that could be forced to sell in a bad time this year. I have a deal I'm working on that a developer made a new property, we keep them on for a portion of promote, they give us their 3.25% HUD loan and we buy it at a 5.5% cap in a high growth market.
Any deal getting done now needs a good thesis and conservative enough to where the equity you are raising isn't scared this will flop. Resi cap rates have been dropping for the last 30 years, there are some increases to it, and if you can take advantage I'd imagine once interest rates go back down to the 4s you can sell again in the 4 cap range. Occupancy is still great, rents will increase slower than the last couple years, but that just makes the pricing even more important.
$45M into core multifamily with no debt (given todays rates)
$45M into land, likely use some leverage here
$10M into merchant developers in cities with significant population growth past 10 years
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