Tuesday, August 17, 2021 / by Ken Couture
The advent of the global pandemic has brought uncertainty to many industries, and the entire real estate industry is no exception. However, the multi-family sector continued to weather the storm relatively well, especially in suburban communities. We have already witnessed this in our portfolio-despite the turmoil in 2020, our rent payments and occupancy rates have remained stable.
Not all markets are able to cope with the impact of the pandemic so successfully, as we have seen in areas such as Manhattan or markets that rely heavily on tourism funding. However, even these areas are beginning to reappear, rekindling optimism in the post-pandemic economy.
For real estate companies, the changes brought about by the pandemic, coupled with the economic recovery, helped the team prove its interest in the secondary and tertiary markets. With strong influence mainly concentrated in the Sunbelt area, our company is capitalizing on this interest and expanding further westward to establish a business in Las Vegas.
What makes this the right time to take this action, and what should other multifamily businesses consider when undertaking this type of expansion? There are several factors to consider:
Plan ahead and bring in the right people.
Even though diligent research and trend watching, it is not always easy to open new markets; there will always be unknowns. Ensuring teams and processes are built around future goals is the key to successful expansion. Establishing a knowledge base can provide an in-depth understanding of the market’s performance under normal conditions and enable the team to prepare for the unknown in response to sudden changes in the post-pandemic situation.
Choose a market you understand.
While chasing low prices in the traditional "big city" market may be tempting, inexperienced, unknown factors can make navigation difficult. I'm not saying to avoid those who enter the market, but it is important to look for opportunities to take advantage of the company's strategic advantages.
Don’t be afraid of the data.
Regardless of market or transaction, each of our investments is based on forward-looking data methods. By overlaying source portfolio data with reliable third-party analysis, investors can better identify market opportunities that are most likely to deliver high returns, especially in highly competitive markets.
Wait for the right moment.
When the tourism industry suddenly stopped, Las Vegas and similar markets were hit hard by the pandemic. However, because Americans need safety during the pandemic, as the housing market soars, the multi-family sector has achieved a stable balance. With record housing prices, multi-family residential assets will continue to maintain stable demand.
According to CB Richard Ellis, as people look for new houses and regain the financial flexibility of independent living, the demand for multi-family homes is expected to rise in the Covid19 rebound. Starting in 2022, the industry is expected to grow across the board, but the recovery situation varies from region to region, so entering the market will seriously affect timing.
Be diligent with the transaction you are evaluating and underwriting. Set and focus on long-term goals, and don't sacrifice portfolio life for short-term gains, especially in an over-expanded market. For every real estate investor, there will be great opportunities to enter new markets and expand their investment portfolios. Be patient and take the time it takes to enter the market and invest in resources to stand out at the right time.
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