5 Market Segments That Are Producing Discounted Property Deals Now
This is a great time for well positioned real estate investors to take advantage of better priced real estate assets.
There are several major market segments ripe for harvesting discounted real estate deals, with lots of upside potential.
1. Corporates
Big companies have acquired a lot of real estate over the past five to 10 years. Much of it they no longer need for the purposes they intended it for. Such as office and retail space.
Many can benefit from shedding these properties, especially as they substantially downsize their staff.
This includes corporate giants like Disney and Amazon.
2. Home Builders
Builders buy large amounts of property in advance of their needs. When the market shifts like this, they are often eager to sell off whole projects to be rebranded by someone else, or to close out communities they are already selling.
3. Big Funds
Big funds are suffering from substantial withdrawals. Their yields are lean, and they often don’t provide the equity cushion individual investors and smaller institutional investors need to feel safe. Right now, Morningstar is reporting that investors are pulling more than $1B out of European property funds each month.
The US market can be a big beneficiary of that.
4. Banks
Banks continue to be squeezed by nonperforming debt, and consumers with less funds. Expect more of them to begin more significant loan sales (up to $1T according to one estimate), as well as holding more REOs.
5. Small & Medium Sized Landlords
Many investors rushed to scale rental property portfolios over the past few years. They felt like geniuses, because money was easy to borrow, and property values and rents were rocketing.
Most didn’t have the financial backing to deal with all of the repairs and maintenance that is showing up today. They didn’t plan for the maturing of commercial loans in this lending environment with higher rates, nor inflation in holding and operating costs.
Expect many to have to start selling off their entire portfolios.
Fortunately, for well-connected and positioned investors, these are all great opportunities. All opportunities for acquiring real estate at better values, and benefiting from improving their performance.
