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Depends on the asset. honestly unless its a warehouse I'm not sure what you can buy that you can have any confidence on what that will look like in a year. But anything for a price...
It’s a great time. Or would you rather go off on your own when the market’s peaking? No way.
Not to mention that putting together a deal - finding a property, getting it under control, designing the building and getting the project entitled, getting financing, etc. - takes about a year minimum.
The OP is talking about buying existing stuff at appealing price points.
Honestly if now is not a good time for you to go out and buy an asset then when will be? If today's chaos is not enough for you then what sort of bloodbath do you need to justify entrepreneurship, and if that's what you need then how many deals over how many years will you do as an entrepreneur? You do 6 deals during a blood bath and then nothing for the following 12 years?
Where are you seeing a bloodbath? From what I've seen, industrial, self-storage and multifamily prices have gone up. MF is particularly worrying since there is a built-in premise that the government will bailout households indefinitely.
I haven't seen any office, retail or hotels being traded in my market at least. Can definitely see redevelopment/repositioning/ride-it-out opportunities in the hospitality space if prices drop significantly enough however if CMBS ends up getting bailed out there may not be any opportunities. Office in certain markets may end up performing well if purchased at the right price. Retail seems overbuilt and I'm not even sure if there is a deal there. Good retail might have some ride-it-out potential although not sure if prices dropped. Bad retail redevelopment plays may be opportune but they seem like larger checkbook type of plays.
True. It's hard to ignore traditional cyclicality in our industry though and the government's response due to Covid presents a novel situation whereby they effectively put a floor at the top of the cycle. Is the expectation that rent growth will be virtually non-existent as market returns to full production? Fortunes are usually started during times like these however the government's approach is killing entrepreneurship by bailing out the established and the overextended.
The gov't effectively has handed out bailouts in large to the industry both CRE and resi RE. Existing owners can refinance at stupidly low interest rates. Existing owners can plug their fingers in their ear and act like nothing has changed because lenders are playing (or forced to play) nice, for now. Market forces of supply and demand are suspended in thin air as residential tenants are given free money to pay rent (not implying it's not justified) and disallowing evictions from taking place.
I think you would be an idiot to start a real estate venture now. There was a study that showed on average, the industry underperforms towards the end of the cycle and overperforms at the beginning of the cycle. "Well that's obvious" you may ask, but it bears repeating. If you are starting a new venture at the end of the cycle, you will buying assets at the top of their value, thus you will have to deal with more risk to the downside.
There hasn't been enough pain in the market. Have you heard of foreclosures taking place among the retail/office sector (excluding big box malls which is not a new phenomenon)? Have you seen the value-add MF folks like Grant Cardone have to sell those properties below basis ? No.
It's too early.
If you have someone else writing the check then yes, it’s a great time to do your own deals.
Just started my own shop. Started working on my thesis 4 years ago. Began socializing the idea with capital a year ago with equity to see if there was a captive audience for both US and European deals.
Publicly launched right at the start of covid. Closing first deal before year end hopefully. Time will tell.
good stuff. what is your thesis?
Started doing my own deals as well (anything from existing to ground-up). Initially I thought Covid would bring prices down in the residential market, but prices/demand seems just as strong, if not stronger, than pre-Covid). I guess it depends on what market you’re in and how much margin of safety you have
There is never a "good time". There is always a reason to wait. In strong markets, you won't have the resources to compete with established players. When conditions are as they are currently, capital markets can be frozen, or uncertainty paralyzing. Without wanting to moralize or sound like a self-help book, changing your attitude and questions from being fundamentally pessimistic ("now is a bad time for XYZ reasons") to optimistic ("now is a good time for ABC reasons").
I think as an entrepreneur, uncertain markets are your friend in the beginning. If bigger guys are on the sidelines, or retrenching on some of their own problem assets, that is an opportunity for you.
Yeah, you totally should.
I don't do RE full time, but so far, I'm either under contract or have put in offers on a 6 unit, 20 unit, and an 8 unit.
My niche is affordable housing in a tertiary city (think Section 8 etc). Eventually I want enough money to buy value add/affordable housing development projects in Tier 2 cities (Nashville, Phoenix, Columbus etc).
Doing a flip on the side right now, if that goes well, I'm going to continue.
Damn that's awesome
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