Capital Allocation
Learned so much from this sub. Would love to know this group's inputs about my case. I'm creating a commercial real estate holding. The capital will be between 7 to 8 million and the properties can be across the US. The initial idea was to invest in internet-proof services, such as dental practices, restaurants, gyms and a few multifamily units. Given all the effects of Covid-19 on the market, the scenario has changed, and hopefully it won't last too long (even though the "pandemic risk", in my opinion, will become a variable from now on). In any case, most landlords (and tenants, of course) are suffering. Considering the 2021-22 biennial, how would you guys allocate this capital?
[{"id": "fon6r0k", "text": "What sort of rate of return are you hoping to achieve?", "replies": [{"id": "fonchqh", "text": "Looking for above of 7%", "replies": [], "depth": 2}], "depth": 1}, {"id": "fon8qaw", "text": "What\u2019s your competitive advantage? Why should an investor use you to diversify by market instead of investing with different operators in those markets directly? That\u2019s not a huge AUM number, you\u2019re going to do asset or property management in different markets and charge the fund for those costs?", "replies": [{"id": "fonckqs", "text": "It will be for my family only, no outside investors.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fon9iub", "text": "Industrial centers designed for heavy-use distribution functions located in markets that feed into places where there is a higher than average demand for shipped goods seems like a sensible option. I can\u2019t really claim a anything with relative certainty these days, though.", "replies": [{"id": "foncn54", "text": "I agree with you.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fonoyqk", "text": "I'm not judging but something doesn't square for me - are you targeting a 7% equity return?  \n\nGiven the underlying market uncertainty and disrupted fundamentals, 7% on CRE equity seems pretty light.", "replies": [], "depth": 1}, {"id": "fskaqsk", "text": "Multifamily still looks good. NMHC reported over 90% collections in both April and March. Any real estate is so local market dependent though.\n\nLocal reports from the big brokerages are available on their websites for free. Those will give you an idea of which product type performs best in your market. Most of them should be quoting how sectors performed during the GFC in comparison to what they expect for COVID. That will give you an idea of more resilient assets in your market.", "replies": [], "depth": 1}]