Given that the pandemic has been a bloodbath (that has yet to fully play out) for both commercial and urban properties, we are staking our bets where demand is headed over the several years. That statement comes from Estate Investing’s Chief Executive Officer, Nate Nead. He says that we see these occurring in several residential buckets, including the mountain west, midwest, and small-town America.
Furthermore, Nead points out that the growth of millennials out of urban areas is further driving demand in smaller towns away from the coasts. We have already seen double-digit growth in these areas while commercial and urban values have plummeted by more than 50 percent.
This observation somewhat makes us think about all the possibilities in the real estate industry once the world goes back to normal, or, at the very least, settles down a little. To shed some sort of light on the subject, we have talked to our friends and asked their opinions about the most significant realty investment opportunities in 2022. Here are their answers:
New York City Properties
I am a bit biased but I think NYC real estate, particularly Manhattan real estate, is a great opportunity right now. While the national housing market is on fire, Manhattan has been pretty weak since COVID-19 started and that was after it had been slipping for about five years. We’re probably down about 20 percent from the peak.
Historically, NYC has always rebounded from previous downturns and cap rates are pushing 3 percent which previously was unheard of in Manhattan.
– James McGrath, Co-Founder of Yoreevo
Single Family Homes
One of the best real estate investments someone can make in 2022 are single family homes that appeal to first time home buyers. In my expertise, if someone purchases a home in need of minor or major repair/renovation, they could turn that property around and sell it for a profit.
Even in this hyperactive market, we are still seeing homes sit longer on the market if they need major renovation. This leads to excellent opportunities for those willing to invest to ‘flip’ the home. Flipping a home that is attractive to first time buyers is key considering that first time home buyers make up the largest portion of home buyers.
– Jason Gelios, Author, Realtor, and Founder of Community Choice Realty
Off-Market Deals
Foreclosures may be making headlines but will not likely line your pipeline with deals in 2022. That means you can join the rat race on what is listed on the multi listing service (MLS) or chase your opportunities behind the scenes with off-market deals.
Creating development deals, chasing creative finance deals from absentee landlords, or finding older homes needing heavy repairs are just a handful of ways to hunt down opportunities. Hyperlocalized experts know that it is about consistently marketing to the right audience at the right time in the right channels with the right message.
– Aaron Norris, Vice President for Market Insights of PropertyRadar
Struggling Commercial Establishments
The value lies in the tragedies of the businesses that were not well-capitalized and can no longer make their mortgage payments, like hotels. Keep an eye out for the retail centers that did not get lucky enough to have all essential or financially strong tenants and are now sitting on a lot of vacancies. Financially strong restaurateurs with a good takeout concept will find 2nd gen restaurant spaces at record low prices, depending on the financial situation of the landlord.
Retail, hospitality, entertainment, restaurants, and most other commercial real estate assets are backed by commercial mortgage-backed security (CMBS) loans which is a government sponsored entity (Like Fannie Mae for Residential). To my knowledge, it seems like lenders bundled up a bunch of commercial real estate (CRE) notes and created a bond and the entire CMBS market was hit hard by COVID-19 and sounds like it can blow up like 2008 did for residential.
There are 10 million mortgage holders right now on the forbearance program which is set to end in the next 30-60 days so we will either have an oversupply of foreclosed homes hit the market or many people are just taking a break from their mortgage and plan to start paying again when the program expires.
– Robert Velez, Investor and Realtor at KW Commercial
Small Town Real Estate
With more people realizing the value of going back to the basics during the pandemic, living in small towns to save on costs is going to be a big trend this year. With hundreds of clients from different states whose taxes we are managing, I have personally gotten to know the huge benefits of living in small towns.
The best benefit is lower taxes and affordable homes. More so, there are places where the state income tax rate is 0 percent—that is right zero percent. Hialeah and St. Petersburg in Florida and North Las Vegas, Nevada top the list—all with property tax rates lower than 0.6 percent only. Compare that to New York’s 3.4 percent.
Retiring in smaller rural towns can be even better for the pocket considering the lower cost of living and better community life. However, be prepared for the lack of stable internet networks, fewer commercial and healthcare facilities, and fewer work opportunities.
