I wanted to take the chance to dive into why I believe that commercial real estate is uniquely positioned as the best asset class to be looking at right now.
Recently, I posted why I don’t think we’re cued up to have a crash for residential. A lot of people may think, if we’re not going to be queued up for a residential crash, shouldn’t I be investing into residential properties?
Well, there are pros and cons.
The pro is everyone else and their brother is looking for flips on single family residential houses and the market is absolutely on fire. The con is that people are getting 50 bids on every house, and this is fine if you are then just willing to accept a lower return on the property because you’re kind of speculating on the future value of what that house is going to be.
And I think that for me, in my experience, that has been a way to set yourself up for potential failure. I’ve found that if you buy things under their intrinsic value (under the value that it costs to either build that or under market value), that’s how you ultimately win the game.
Right now, what’s happening is there are some issues in the commercial segment due to the switch of working from home, the lower hotel occupancy, and the hospitality industry as a whole. Restaurants right now have a really thin profit margin because they are at 50% capacity or less due to current limitations and restrictions.
These businesses have now experienced a year of pain. This means that there is distress that is percolating and deals that can potentially come out to the market.
And that’s what I’m looking at.
There’s going to be a lot of opportunity in the commercial real estate game in the coming year or two. The best thing you can do is prepare yourself to take action when these deals come around.
Don’t forget to snag a copy of my new book Catching Knives.
Packed with practical advice and personal anecdotes, this is your guidebook for embracing the next economic downturn and navigating the risk of distressed investing. With the right strategy, you can be one of the few who lean into hard times, make the most of them, and take advantage of once-in-a-generation opportunities.
LinkedIn: Jake Harris