Coronavirus Disruptions to Cut Into Apartment Sales Prices
Will Smith
Retired NFL player | Realtor | Residential & Commercial Real Estate | ??Podcast host | #Buildinggenerationalwealth
I just checked out some costar models on possible outcomes to the apartment industry prices. You will notice that the industry has been on a good run since 2009. Real estate always has cycles, we have been past due for a correction. Although nobody had a crystal ball to predict COVID19.
Take a look at the three models, you will see a base case forecast which suggest prices will flatten. This is what everyone is hoping for, but I don't think that is realistic given unemployment claims and uncertainty of when the economy will open back up. The next model shows moderate downside in price per unit. I believe this would be the best case scenario. The last model shows a severe downside which would be doomsday for majority of the syndicators out there. A lot of operators have been over paying for properties.
Bottomline is if your an operator right now, you are going have to dig deep to try to find a way to make it through this COVID recession. If you have been using third party managers, it may be time to fire them and pick up the playbook and find a way to win the game. One thing my time in the NFL taught me was everyday you have to compete and if things don't go according to plans, make adjustments and find a way to win.
If you have been sitting on the sidelines training, mastering your craft and waiting for your opportunity to get in the game and show the world what you got like me. I think we are about to have that chance in the coming 6-9 months. This will be the opportunity of a lifetime. Real wealth is made in the downturn. Now is the time to be talking with your investors and educating them on the present opportunity. You should also be building out your rockstar team. You are only as strong as your weakest link. I'm excited about the opportunity coming our way in the coming months.
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4 年And 1 asset class that performed well during last downturn 08
President at Lion Dynasty Venture Group
4 年Possibly we have To See?
?? Award-Winning Charlotte, NC Real Estate Expert | Top 500 Agent - Charlotte Real Producers of 2023 | Passionate about crafting seamless property journeys with EXP Realty"
4 年Keep up the great work!!
Real Estate Advisor
4 年Great scenario you laid Will. Of course we don't have Crystal ball to predict that everything will be normal like it was before. If I may add couple ideas of mine is this. 1- Retailers is done I don't think it will come back from this ( especially big box like Macy's,Nordstrom, they pay top dollars for the rent). 2- Office buildings they have to have the new arrangements for the layouts for the employees(Social distance) 3- Industrials (Logistics which has to do with supply chain and refrigerated will be the most important) 4- I think Multi family assets will survive especially medium rent level like ($1000 to $1800 range) people still can afford it which Class B, and C types. Class A types will suffer because of the high uncollected rent and high maintenance which will affect the NOI. Multifamily owners and operators who paid top dollars and high leveraged will go busted and try to unload the assets as quickly as possible. I strongly believe that owners will do better in this given situation who are more hands on ( managing like you have mentioned ) and have good relation with tenants working together and showing some empathy who are in dire situation. After all people have to live somewhere but key is customer service no bias.
Owner/Broker of Infinity Investments
4 年I think we will see a moderate to severe downside but that not like 2008. Great post ????