Recession resistant property types?
[deleted]
[{"id": "fpbcb6p", "text": "Scaled multi family in secondary markets", "replies": [{"id": "fpbt9q4", "text": "Workforce housing. \u201cMy\u201d poor people pay the rent.  They don\u2019t give a shit if the stock market is 1500. They need a place to live and if you supply the nicest affordable house or apartment in your area at 30 or 35% of 80-100% of your Area Median Income you will have a formula that makes money and you won\u2019t be a slumlord. Maybe HCOL cities wouldn\u2019t support it but that is not what I hear.", "replies": [{"id": "fpcbbns", "text": "This is something similar to myself.\n\nMost of the people that rent from me are ordinary folks earning 40k to 80k\n\nThey have no investments and none complained when stocks tanked 30% they jist want to eat and sleep in a nice home. They have decent cars and nice families.", "replies": [], "depth": 3}, {"id": "fpcpq3k", "text": "Yessir!", "replies": [], "depth": 3}, {"id": "fpdrecu", "text": "Damn straight. Provide value through actually giving a shit about your tenants and the property.", "replies": [], "depth": 3}], "depth": 2}, {"id": "fpbx9q1", "text": "What does secondary markets mean?", "replies": [{"id": "fpcm98c", "text": "Tier 2 markets, so large metro area but not tier1 like Manhattan, San Fran, Miami, etc. Think more like Milwaukee or Knoxville.", "replies": [{"id": "fpcpnzp", "text": "Yup - this is what I meant", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fpcqz54", "text": "What does scaled mean in this context? sorry am not a native speaker so i dont know.", "replies": [{"id": "fpcup6e", "text": "I typically look for 100 to 150+ unit scale", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fpbcqnz", "text": "Refrigerated warehouses", "replies": [], "depth": 1}, {"id": "fpbd2s6", "text": "Self-storage facilities: Baby boomers retiring, downsizing, people moving back home with family during down economy, and moving in search of new opportunities when things pick back up. Cheap builds, easy to scale up/ build/ permit to expand existing properties. Low maintenance and CapEx costs. \n\nMid-sized industrial: former retailers going to all online, requiring fulfillment centers. Increased ship to home purchasing propped up by low shipping costs.", "replies": [], "depth": 1}, {"id": "fpbdixo", "text": "NNN's like Dollar Generals or Walgreens, industrial. Usually student housing is very recession proof, but these are unusual circumstances.", "replies": [{"id": "fpcp5m3", "text": "Student housing at tier 1 schools is OK but otherwise you\u2019ll get your clock cleaned. Students will move out of your building to one slightly nicer down the street the second it\u2019s built and your investment slides into obsolescence. You\u2019re also taking on a lot of effectively single tenant risk with the school. The only people who make money in that space are the developers.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fpbdlsy", "text": "Look up the NAREIT rent collections data. Highest collection % is pretty indicative of resistance.", "replies": [], "depth": 1}, {"id": "fpbeb6u", "text": "I'll have about $2.5million in MF  in Cincinnati, OH in B-C areas in the coming 30 days. Good management is already in place.", "replies": [{"id": "fpbkgfo", "text": "Have you spoken with a CRE broker yet?", "replies": [{"id": "fpboa4p", "text": "I will be the broker on it", "replies": [], "depth": 3}], "depth": 2}, {"id": "fpbl5qb", "text": "&gt;I'd love to hear a little more.  You got a proforma you can send?", "replies": [{"id": "fpbocck", "text": "Proforma, are really good, prices are aggressive. Just message me.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fpbesuv", "text": "Assets leased to the federal government", "replies": [{"id": "fpbsm3d", "text": "Read the leases carefully! Some don\u2019t have escalations.", "replies": [{"id": "fpbtug6", "text": "I would recommend reading all leases carefully lol!", "replies": [{"id": "fpbzrhn", "text": "Sure. I guess my point is that govt leases are different from a \u201cnormal\u201d lease. The GSA is very particular.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fpbfr9q", "text": "Multifamily, self storage, mobile home parks, and medical office buildings", "replies": [{"id": "fpcofb7", "text": "2nd gen off campus MOB is a terrible buy for 1031, tenant base isn\u2019t sticky (unless you cut the tenants into the deal) and if they leave you need to spend like $100/sf in TI&amp;LL work to make it ready for next tenant if you can find one. \n\nCheck size from OP doesn\u2019t buy enough of it either and is way too small for anything on campus even in a tertiary market.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fpbfzt0", "text": "Industrial or mfr (w/ pre-funded reserves for bad debt expense from seller)", "replies": [], "depth": 1}, {"id": "fpbg1tc", "text": "Multi family and self storage, but don\u2019t worry about the recession like everyone else. People will be panic buying MF and storage facilities. You need to shake while everyone else bakes. Find a screaming deal on an office complex, time the market, 1031 again on the upswing.", "replies": [{"id": "fpbjlt9", "text": "Good point. Office might not be the same but it's not like it will cease to exist meanwhile everyone will be offloading because every second article says that it is done.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fpbgmgv", "text": "Most office sellers do not have tenants and do not want to leave it for months.  Now the new tenants want to haggle for better rent since they have more properties to pick from. \n\nYou should also consider MF buildings. Got 180 days to do an exchange. Which ever opportunity comes first. Good luck.", "replies": [], "depth": 1}, {"id": "fpbgrfl", "text": "NNN Starbucks, Panera, Walgreens, dollar general, etc", "replies": [], "depth": 1}, {"id": "fpbj95a", "text": "One word \u201cshelter\u201d", "replies": [], "depth": 1}, {"id": "fpbjcme", "text": "What is your acquisition criteria? Feel free to DM", "replies": [], "depth": 1}, {"id": "fpbkdac", "text": "Yes look for the NNN deals with strong corporate backing. Investment grade tenants. Dollar Generals, Starbucks, QSRs if the franchisee is solid guarantor, AutoZones and stuff like that. \n\nCap rates will be aggressive except most DGs I see are trading in the high 6s", "replies": [], "depth": 1}, {"id": "fpbkjfr", "text": "Mobile Home Parks - very low expenses and affordable living", "replies": [], "depth": 1}, {"id": "fpbmfw2", "text": "Anything catering to essential services (grocery, medical, hardware, etc.) I would have said MF 2 months ago, but talking to fund managers, I think that because the market was built on sometimes even free money (special thanks to European negative interest rates and foreign capital subject to inflationary pressure) that the safe haven of very low returns but stable income has popped, why? Because MF markets cater to workforce and transient demographics. Those are the people most impacted by a shutdown. So although it\u2019s traditionally been a safe haven, I think those days are long behind us. Inability to generate income will directly impact MF values. I can see serious panic selling coming as people stop paying rent. Values will decrease. And if you want to buy MF, well I think buying season is right around the corner.", "replies": [], "depth": 1}, {"id": "fpbt5d9", "text": "Senior Housing is generally considered recession-proof as the elderly (75+) tend to have their assets in safe places and it\u2019s more need based (you\u2019re not going to delay moving into a care home since you need the care).\n\nObviously, coronavirus hits different. I\u2019d still say the asset class is recession resistant, but not coronavirus resistant. In 08-09, it was the only asset class to still have positive rate growth.\n\nThis isn\u2019t an asset class you can just jump into though, given there is a huge operational component. Each community is more like a proper business than just a real estate property where you collect rents and need a few people to manage it.", "replies": [{"id": "fpco8qz", "text": "Aside front the fact that you can\u2019t place OPs money in senior Housing because his check is too small, You can\u2019t just buy Seniors Housing - in many states you need a license to own it (aside from an Operators license). It\u2019s also not tax efficient for OPs purposes, you would need to set up a RIDEA compliant REIT to place the 1031 money and have it qualify per 1031 rules. \n\nAlso you need more than a \u201cfew people\u201d to manage it, for an 80 unit facility (below which you won\u2019t get enough scale to operate) you need like 30 FTEs.", "replies": [{"id": "fpdvkoa", "text": "Read the last sentence\u2014I never said you only need a few people to manage seniors housing, I said that was the case for traditional multi family/residential.\n\nAlso, you can buy into seniors housing since there is already an operator with a license in place. Developing ground up you\u2019ll likely need to rezone and get licensure, but the latter is it easier to get especially if you\u2019re going with a 3rd party operator.", "replies": [{"id": "fpe58ap", "text": "Depends - state by state - some states require pre-approval in order to own the dirt even if you aren\u2019t operating. Check ALFA they have a list of states with bifurcated licensure requirements.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fpbunn9", "text": "Government buildings", "replies": [], "depth": 1}, {"id": "fpbut97", "text": "Industrial with a focus on e-commerce/distribution facility.", "replies": [], "depth": 1}, {"id": "fpbwt4t", "text": "Multifamily is your best bet, maybe even student housing because student loans are taken out everyday. Pm me if you want some more info, I know of plenty of off market listings that could be perfect for your exchange", "replies": [{"id": "fpe6d4g", "text": "Student housing is not necessarily insulated. This property type has come under intense scrutiny. I work in the CMBS buy-side world and there have been a number of defaults. It may not be to the level of hotels or retail (not grocery anchored) but it's certainly not industrial/warehouse type product. \n\nI do like multifamily product assuming it's in a low crime area with good demographics being proximate to employment areas and is walkable. \n\nEither way make sure to get a good property condition report and ensure there are no environmental issues.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fpc0jqe", "text": "It\u2019ll be tough to deploy capital.  It\u2019s difficult to value investments.\n\nDurability of cash flow is important.  Apartments, and class A industrial are the two options I see as the most promising.", "replies": [], "depth": 1}, {"id": "fpc8w9z", "text": "self storage, distribution warehouse, mobile home parks.", "replies": [], "depth": 1}, {"id": "fpc9s0a", "text": "There are vacant office buildings throughout the country in the USA. How difficult is it to just convert the buildings to mixed-use buildings with restaurants, retail, and grocery stores on the first 2/3 floors and residences above that?", "replies": [], "depth": 1}, {"id": "fpclmvb", "text": "Not sure about the US, but here in the UK agricultural land has relatively poor returns but is super stable and completely recession-proof.", "replies": [], "depth": 1}, {"id": "fpcozo3", "text": "Have you sold yet - there won\u2019t be anything decent launched until 3q, capital markets blow right now so only properties changing hands are forced sellers. Even if you\u2019re just buying the 4 family next door your reserve requirement / interest rate will be high and may make paying the tax and reinvesting cash somewhere else cheaper than what you\u2019ll get for a return on a property right now. \n\nAlso look at self storage facilities, apartment buildings, or manufactured housing. The check size is pretty small so you should be able to identify something that fits what you can buy. Also unlike a lot of the other stuff thrown out here (NNN, offices, MOB, etc) there aren\u2019t really any crazy capital requirements or leasing costs. You should be able to pay for everything out of operating cash flow with MF/MHC/Storage. Anything else you\u2019re gonna have a bad time when your tenant needs you to come out of pocket a ton of money for TI/LC on a roll and the properties become increasing illiquid as term burns at the building.", "replies": [{"id": "fpcqae3", "text": "Thanks for this. I\u2019m selling multifamily apartment buildings. We signed the contract yesterday. Not a forced sale, I was just tired of managing the managers and got an offer I was happy with. \n\nWe have considered just paying the taxes. I don\u2019t know what to do, TBH.", "replies": [{"id": "fpcxl4o", "text": "If you\u2019re trying to stay away from managing it you might be better off just paying the tax and taking the lick - none of the other property types are less manager intensive (even self storage takes management) than multi family. Do yourself a huge favor too and don\u2019t throw money at a TIC syndicator, they are generally bad news bears and right now are desperate to get money out for identification and with such little deal flow are making worse decisions than they usually do.", "replies": [], "depth": 3}, {"id": "g18weju", "text": "If you're tired of the property management, you should consider a DST (Delaware Statutory Trust)\n\nA DST is 1031 Exchange vehicle used for accredited investors to defer capital gains tax from the sale of investment real estate assets. So you can still enjoy the benefits of owning institutional grade real estate without the property management hassle, and potential tax liability.\n\nThe investor has the potential for monthly income, appreciation and diversification. It's a very passive investment in real estate.\n\nIt's a partial ownership in a trust that holds real estate property. You have a variety of options to chose from, for example: an Amazon fulfillment center, multifamily, storage units, healthcare facilities etc. \n\nDST's are readily available for you to close in 2-3 days so the 45 day window is not a problem. \n\nInvestors in DST's have protection against loan recourse liability, because they are not personally liable for the acquisition of properties included in the DST. And the investor's credit is not on the line which frees up their balance sheet.\n\nIt is not a TIC, DST's are very passive and all the management decisions are on the sponsor who legally has to act in the investor's best interest. \n\nI own an advisory firm, and can send you more information on DST's if you're interested. We work with industry leading sponsors such as Inland and Cantor Fitzgerald, and have an extremely experienced team that does high level due diligence on the properties we offer and have been successfully doing that since the start of DST's.", "replies": [{"id": "g19q8ly", "text": "Very timely- we close in 2 days. Let me read up about this.", "replies": [{"id": "g1g53n3", "text": "Of course! let me know if you have any questions or concerns.\n\nYou can always include a DST as a backup during the 45 identification period in case you change your mind on the replacement property or something falls through.\n\nYou can also use DST's for access boot if your replacement property is of lesser value than your relinquished property since the minimum investment is typically $100K but could be as little as $25K depending on the property which allows you to diversify across different classes of real estate.\n\nOne huge thing as well, DSTs are set up to accommodate investor debt fulfillment needs, which increase your investment value, so lets say you sold a $4M property with $2M in debt, you can still roll the entire $4M fully tax deferred, and receive income on the $4M without having to qualify for a loan.\n\nIt's something that each investor should at least be aware of because the majority, including real estate agents don't know about it.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fpcuvpk", "text": "I\u2019d poke around for a 1031 but keep in mind that there just won\u2019t be much great new product available - no one is really selling anything that you\u2019d want to own until this thing passes. Keep your eyes peeled but don\u2019t buy something just to avoid the cap gain, you might do better to just go to cash and invest in something else.", "replies": [{"id": "fpd2a5z", "text": "I\u2019d argue that just as this person\u2019s company needs a buy for a 1031, there are other companies putting deals under contract that need to sell for the same reason. Deal volume is going to be down for a while but I doubt that impacts the \u201cquality\u201d of what is being sold. Even if it does, distressed cash poor sellers are going to be making concessions on deals they can no longer afford to hold in an effort to get out faster in these circumstances. \nOne thing the poster didn\u2019t talk about is their desire for something NNN vs management intensive.", "replies": [{"id": "fpd2ztp", "text": "I mean values are fundamentally impaired to some degree - there\u2019s been no price discovery though - unless I was absolutely compelled to sell I wouldn\u2019t bring anything out right now. Agree that cash poor sellers are probably first to liquidate but the buzz cut theyre going to get on valuations might give pause to a ton of people. If I were in a distressed lower middle market situation I\u2019d be looking for some other way to get cash than thru a sale where I\u2019m probably facing a -20% haircut today just to get buyer back to yield expectations based on debt availability.", "replies": [{"id": "fpd3exq", "text": "That\u2019s a good point, and if you\u2019re in the position to come in as \u201crescue capital\u201d in the next few months, you may be able to find some great opportunities. I\u2019m not sure how 1031\u2019s would work in that scenario though. Also highly dependent on your existing relationships.", "replies": [{"id": "fpd4nc9", "text": "Well that\u2019s where I\u2019m focused on opportunities right now - providing pref equity to \u201csemi\u201d distressed sponsors - coming in as a mezz piece shouldn\u2019t impact the tax status of someone who bought a property thru a 1031. Recapitalize and hold don\u2019t sell unless compelled will be the story of the next 6 months. \n\nSeparately where the ID period deadline got extended to July 15 but there\u2019s no new product in the market it will be interesting to see how bidding goes for lower middle market deals - would think there\u2019s a lot of \u201cuninformed\u201d money chasing a handful of deals bidding up prices on crap where the only real winners are the guys who paid the tax and didn\u2019t buy like an out parcel Applebee\u2019s with 3 years of term for a 4 cap on in-place.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fpd2vzl", "text": "I work for a self-storage PE shop and we\u2019re business as usual rn. March and April #s look great and we\u2019re using the opportunity to recapitalize some of our portfolio. \n\nSS has different demand drivers, mostly life changes i.e. household consolidation, relocation, downsizing, death, etc. In the 2008 crisis, every CRE REIT sector posted negative with the exception of storage with 5% dividends.", "replies": [{"id": "fq457l1", "text": "Does your group own and operate the SS or do you contract out the operations side and simply lease the property?", "replies": [{"id": "fq4r0e1", "text": "Vertically integrated, own and operate! Storage is a nickels and dimes business with plentiful nuance, no one drives value like an owner operator as they\u2019re incentivized beyond the p&amp;l", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fpdjakk", "text": "Industrial. Online shopping continues to be on the rise as traditional brick and mortar suffers. The pandemic has accelerated that trend even more and these retailers need warehouse space to distribute their goods. NNN leases are going to maintain or gain popularity and if you buy wisely, overhead on warehouse is very low. If you don\u2019t NNN, core factor is more straightforward on that type of asset too.\n\n*Edited to say I worked for a strictly 1031 investor/operator for years and they are very active in closing deals. If you\u2019re looking for another 1031 I can connect you.", "replies": [], "depth": 1}, {"id": "fpdr9an", "text": "Buy a large gated pc of property in a heavy industrial area, for a repo lot. \n\n(I happen to have one for sale in 44077 if interested, along w build. &amp; 36 ac)", "replies": [], "depth": 1}, {"id": "fqopmml", "text": "If you get into a real jam, look at Delaware Statutory Trusts (DSTs).\n\nIf those don\u2019t look appealing, NNNs (like Walgreens) or multi tenant industrial works well too.\n\nMulti family is good, just know what you\u2019re doing.", "replies": [{"id": "fqqcinj", "text": "We are actually selling our MF\u2019s. I\u2019ve looked at some NNN\u2019s like Sherwin Williams but ultimately I think I\u2019m going with both a medical building and car wash.", "replies": [{"id": "fqqo38h", "text": "Lots of liability with a car wash regarding environment...", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fqs4pjl", "text": "There is liability with everything. That\u2019s what insurance is for.", "replies": [], "depth": 1}]