July 14, 2020

A Scavenger Hunt for the Silver Lining in Post-Pandemic Real Estate Industry – Part 1

Top view of commercial real estate properties in New York City amid pandemic

 “May the odds be ever in our favor!”

That’s the line they always utter in the post-apocalyptic world of Panem that serves as setting in the Hunger Games Trilogy. No one could have predicted that in the year 2020, our own version will come to life in the chaotic-world situation of the ultra-successful film franchise. There is no denying that the world of real estate investing has been shattered by the recent COVID-19 outbreak. The unprecedented extent of spread and effect has been such that not even experts dared to predict the precise impact of the Coronavirus on the US real estate market. Nevertheless, despite the uncertainty lurking around us, savvy investors are still able to find real estate investment opportunities amid the pandemic.

Being the leading brand in deal finding, Real Estate IQ still manages to establish a concrete game plan to help and aid struggling real estate investors to emerge triumphantly in these trying times. Our products and services, maintained and continuously improved by our hardworking team of professionals, will serve as our modern-day Noah’s Ark during what seems to be a modern-day “real estate great flood”. 

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Equipped with expertise from REIQ, let’s embark on a journey to find not just the best deals but also to focus on imperative aspects of the current scenario and eventually discover hidden opportunities for real estate investing for the remainder of 2020.

Where are we NOW?

Premier real estate industry experts also share an overview perspective of the first quarter of the year, as well as brief market forecasts.  

Obviously, the world we know doesn’t consist of a handbook ready for the pandemic, which is precisely why policymaking around the globe has gone into unexpected overturn. To address the public health crisis and assist its citizens, local governments across affected countries have been cascading several measures over and over again. As a result, there have been very abrupt impacts in a span of a few months on the global economy as authorities mandating travel restrictions, businesses starting to close down, and employees starting to work from home. Since everyone is still uncertain about the impact of the pandemic on the world economy, most of us fear the coming of a deep global recession.

Reports said that investment firms have already noticed investors clutching on to safety nets. Most investors these days are, unsurprisingly, looking for investments with fewer risks. They are not looking for excessive returns, they are really looking to preserve capital, create revenue and benefit, and try to avoid taking undue risk in a perilous market.

In the pursuit of guiding investors in their decision-making process, we have arrived with four aspects to focus on when identifying opportunities post-COVID-19 outbreak:

A.   First things first! (Real Estate Basics)

Investors must learn to separate real estate fundamentals from COVID-specific fundamentals, particularly since this downturn was not caused by a real estate component, banking, or others, but by a biological factor.

However, real estate investors cannot afford to overlook the fundamentals which pose the questions like;

a. What’s the status of  the supply and demand?

b. What are the interest rates

c. What people are feeling about the underlying risk of a downturn considering that millions of businesses across the globe might be permanently shut down in three months or so?

B.    Capital Positioning

The short-, medium-, and long-term priorities for capital deployment is another aspect that investors must focus on. This will be quite personal to any real estate investors since they should be asking themselves what their priorities are. Do they consider themselves as a long term investor who is looking for long term undertaking and not just a temporary upside? Or are they searching for opportunities where they will be driving upside and moving on redirected assets to other long term investments?

C.   Recovery Pattern

Investors must learn to acknowledge the recovery curve since historical events that have substantially affected the global economy could give them a hint on what they should be looking forward to at this point. Even though every downturn and recovery are different, there are still some basic elements to look out for like:

a. where the interest rates are

b. where the unemployment is

c. where the actual occupational demand is coming from

d. how does that demand balance against existing supply

By concentrating on these aspects, you will be able to get a clearer visual of the recovery pattern that is currently existing.

D. Capital Structure

As an investor, you must also look for a stable capital structure since one of the things that almost happens all the time in a downturn is that banks ease lending or they make lending very advantageous to themselves. This means that they will give you short term lending or bridge financing and are not taking the long term risk with you.

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For the next couple of years, we can somehow share some predictions that countries implement to re-stabilize their economy. It is expected that in the recovery phase, we will be seeing more fiscal incitement and tax relief measures while quite essentially, countries will do whatever it takes to get the economy back on the right track.

They will also be establishing tax incentives to encourage developers to shift inventory and to make real estate more cost-effective in this temporarily subdued market since there is a strong indication that investment and housing have a strong multiplier effect for the economy.

An in-depth analysis of the pros and cons of the current global  economic situation is an integral part of not just coping up but more so importantly, of survival.

Being able to have the foresight, tenacity and fortitude to stand the test of time is what separates the masters of the craft apart from the neophytes of the business.

From this point onward, we shall be able to identify the golden opportunities that lie ahead our time in real estate investing.

·Based on the data report presented by Paul Ashburn  and  Lloyd Lee at The Asia Real Estate Reboot, a webinar organized by PropertyGuru Asia Real Estate Summit, in partnership with YOO Worldwide participated in by 691 participants from 37 countries across the world last April 2020.