What You Need to Know Right Now About Real Estate Investments?

If you’re like many real estate investors or brokers right now, morning meetings have evolved into updates on lender forbearance, the tenuous state of rent and predictions that can shift with the next headline. Normally, you can expect capital and investor diversity, especially in New York City, one of the most liquid real estate markets in the world. Now we’re seemingly at a standstill with some exceptions, like opportunistic investment, buyers transferring tax-deferred status to new acquisitions (i.e. 1031 tax deferment) and some less traditional lending avenues. Covid-19 presented New York City landlords with serious rent collection issues. However, there are reasons to be optimistic. You need to be smarter about your investment decisions, certainly, as well as how you deal with your tenants and lenders, but there are opportunities to come out of this ahead. Remember that the current slowdown is mainly due to extrinsic market factors rather than fundamental issues with the real estate economy.

• - Tenant-Landlord Relationships

This is an opportunity for landlords to build good will with tenants by negotiating. First, it’s the right thing to do. Second, New York City landlords have weak leverage under Governor Andrew Cuomo’s 90-day non-eviction order. Landlord concessions range from outright short-term rent forgiveness to partial monthly rent deferrals.

• - Landlord-Lender Relationships

Most owners won’t approach lenders about forbearance unless absolutely necessary. Lenders will generally ask for collections and proof of material change if presented with this, and commercial landlords want to ensure their lender relationship stays solid for future financing needs.

• - The Short-Term Outlook

Second quarter transaction volume is extremely important to watch. There is a high likelihood that it could be the lowest volume quarter in more than a decade in New York City for all product types.

• - Watch the Market

The important thing is to watch the market. There aren’t enough transactions to provide meaningful pricing guidance at the moment, and that may not change for at least 90 days. For now, try to identify the market’s pain points and let that guide your decisions.

Topics: Real Estate, New York Market, COVID-19

Work cited: Forbes, June 2020

If I can help in any way please let me know, [email protected]. Stay Safe & Healthy.