Nov

7

5 Real Estate Investment Strategies for Success in a Volatile Market

Filed Under Economy, Local Market, National Market 

  1. Solutions Create Opportunity

    Solving problems for distressed investors will create prime investment opportunities.  Look for ways to provide workouts for distressed investments.  As loan terms mature, many properties will be unable to cover the debt service associated with new loans. Financing criteria has changed dramatically and will surprise many investors as they look to re-finance.  Large “vulture” funds are being formed for the sole purpose of raising capital to profit from distressed institutional grade investments.  On a smaller scale, attentive investors can capitalize on opportunities by providing solutions in their local market.

  2. Cash is King

    Investors who have been disciplined and kept a healthy amount of liquid assets are now in a favorable position.Kelly Hugh, a well respected real estate economist says “There is such a volume of capital out there. I have three pictures I use in my talks, one is of Niagara Falls, one is the Sahara Desert and the third is the Hoover Dam. The argument is that for a long time we had a Niagara of capital, now people think we have a Sahara but we don’t. It’s a Hoover Dam. It’s all sitting back there. The question is; when does it get released?”

    Those investors who can move quickly and provide interim resolutions will come out ahead

  3. Change Strategy from Growth Investing to Value Investing

    In recent years past, investors had a buffer that alleviated bad investment decisions.  Rent growth and appreciation seemed to remedy any ill-advised acquisitions.Now with rent growth and appreciation absent, property owners are forced to find new ways to produce the yield desired.  Strong asset management combined with tenant retention will help drive yield in existing properties.  New acquisition investments can take advantage of the upward trend in CAP rates.

  4. Avoid Lowering Rents

    Commercial real estate values are tied to the income the property produces.  As retailers are struggling we will see more and more vacancies in the market.  Existing property owners should strive to minimize down time and re-tenant quickly.  Up-front incentives such as free rent and tenant allowances will help entice new tenants while maintaining your property value for the long-term.

  5. “Buy into Fear, Sell into Greed”

    There is no arguing we are in a slowing market, however investors that seize the opportunity can turn this into a wealth-creation market. While the masses are standing on the sidelines there are unbelievable opportunities for a knowledgeable investor.

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