For those looking to invest in real estate, Dan Walsh, founder and CEO of Citimark Capital says the pandemic has made some markets big beneficiaries as the conditions created have prompted many to relocate for a variety of reasons. did. Some of these markets have already seen strong growth – the Sun Belt, for example, remains popular. But in markets where evictions have halted and rents have increased, opportunities are beginning to emerge, mainly on the coasts.
“We’re starting to see opportunities in the Bay Area in San Francisco and Southern California, Portland, Seattle, DC, Boston, places where there were probably stronger controls in place to reduce ownership disruption,” he says. “And so we really saw an opportunity to invest in these markets while also focusing on our current target markets. We also looked for markets with at least $1 billion in annual home sales. And there are many markets that have sprung up in the Carolinas and places like Richmond, Virginia and Jacksonville, Florida, like Tucson, Arizona, Reno, Nevada that have become institutional markets. In the past, we’ve seen Cleveland become an institutional market. I was talking about where you start seeing very high transaction volume. There are a number of markets popping up across the country.”
However, there are other macro factors investors should consider. He says that as interest rates rise, real estate investment limits will usually rise as well. Since prices are low, the transaction volume can remain constant. But in general, when interest rates rise, cap rates rise, and this can make people less likely to sell.
“I don’t think we know what the other side looks like,” he says. “You can see that interest rates continue to rise. So when you’re buying real estate, it’s really important to make sure your rate hikes are hedged and you’re not going into a downturn in the middle of a recession. where you cannot access the market to refinance your loan. The most important thing right now, and that’s probably true in M&A as well, is to make sure your debt structure allows you to give you a lot of flexibility to avoid any kind of default if there’s a significant long slowdown.”
Just as the specter of tax increases has led many to consider selling their businesses sooner rather than later, the specter of a rate hike has eluded some people considering real estate investing. Might be tempted to do it sooner. While this may be true, it largely depends on an individual’s investment horizon.
“If you’re a seller now and want to get out of your property and fund, say unless you plan to keep the property for two to three years, review it to see where it’s going. Still a wonderful time to be a salesperson,” he says. “As long as your investment horizon is two or three years and you can structure accordingly, this is a good time to be a buyer. I think you should take this transition period into account to be on the safe side. Have to look realistic. Whatever happens, you still get the target returns you see.”
Walsh spoke on the Smart Business Dealmakers Podcast about the real estate investment market, what’s hot and where, and how he sees the investment landscape given the economic currents. Press play to see the full conversation.