If you don’t have a post COVID commercial real estate game plan, then you need to get one! In this post you’ll discover how COVID-19 has affected one key aspect of commercial real estate and my 3-step game plan will help you to navigate the changes wrought by COVID.
3 Post COVID Housing Factors
Home Mortgage Crisis: Over two million people are ninety days past due on their home mortgage and some are in forbearance. Although forbearance may continue to be extended and there’s a foreclosure moratorium for some home loans for now, what will happen when these measures end?
Evictions: There are one hundred million renters in the U.S. and thirty to forty million of them are at risk of eviction. There is currently an eviction moratorium, but what will happen in 2021 when it ends?
Housing Shortage: There is a severe housing shortage in the United States. At least 2.5 million housing units are needed and home builders are unable meet the increased demand.
How Does this Impact Commercial Real Estate Investing?
These three factors will put immense pressure on the apartment business and result in a dramatic increase in demand for apartment units. This is because all those people whose homes go into foreclosure will have no option but to rent because of bad credit. Also, renters who are evicted will either move home or rent another apartment. Not only are these key outcomes of COVID, but also due to the existing housing shortage, the market won’t be able to meet the demand of the next generation moving out on their own.
Increased Demand Leads to Increased Value
What happens when there’s an increase in demand? Apartment rents rise and as rents increase, property values also go up. I predict that over the next 18 months to 2 years, those already invested in apartments or those about to invest are going to do especially well.
3-Step Post COVID Game Plan
How do you prepare to navigate these changes? Abe Lincoln gave us great advice when he said,
Give me six hours to chop down a tree and I’ll spend the first four hours sharpening my ax.
To put it differently, preparation is the key. So, how do you sharpen your ax for commercial real estate investing?
# 1: Prepare by Studying
Become a student of apartment investing. If you have money to invest, wait until you get educated, then put it to work investing in apartments. Any other strategy would be irresponsible. You can begin that education by reading my post How to Buy Your First Multi-Family Apartment Building. This teaching teaches you the basics of how to find apartments and evaluate them.
#2: Prepare by Learning How to Get Financed
Learning how to get financing is essential when purchasing an apartment building. There are primarily two ways to finance commercial real estate:
Conventional Loans: To learn the fundamentals of apartment conventional loans and how they differ from residential loans, watch my video Apartment Loans 101.
Creative Financing: In my teaching called Buying Commercial Real Estate Without Bank Loans, you’ll learn 3 creative financing techniques; seller financing, installment sales and master lease agreements.
#3: Prepare by Getting Help!
Don’t try to do this by yourself and consider applying for my Protege Program.
