Investor walking away from CRE. Good luck to you all.
Hello 

I thought maybe someone would want to hear out our story. 

My wife and I have an RE asset in NYC which required a 1031 to shelter hundreds of thousands from taxes. We looked at CRE deeply, as it was a natural choice to put the money to work. We found a great broker and team. We spent a solid year looking at the market and learning. Everything was going pretty good. We were doing our due diligence. 

But we started seeing red flags at the end of 2019. The epic gains of the 2010's we're fading away. Good deals seemed few and far between. We became worried about retail, office and MFDa in the long run. I ( a regulator)  am seeing a lot of pretty burdensome regs coming down from the state. My wife (medical field) is witnessing a rapid change in how office space is used in her sector. There were other red flags too. We'd talk to business owners about their outlook and how they felt about their leases. We did not get great feedback. 

The worst part of all though. Cash. We simply were horrified we wouldn't have the cash to cover a black swan event. Something bad could happen and we wouldn't be able to cover it with our normal jobs. 

Then bam. Covid 19. Our current property in NYC is now three months overdue for rent. It's paid off, but if we were leveraged right now we would be getting destroyed. 

We recognize some incredible deals could be out there right now. But please,. if anything, recognize that this is a lesson in the power of cash, savings and emergency funds. We are simply not in the position to offer that at this moment, which would have and will lead to our doom in CRE

People were very helpful here, I wish you all the best of luck in this turbulent market. Thanks for your knowledge and wisdom over the past year.
[{"id": "frfjui0", "text": "Best of luck, good sir.", "replies": [], "depth": 1}, {"id": "frfnmku", "text": "can you post an example of one of the good deals?  which website are you looking at?  what metrics do you look at?  potential or current cash flow?", "replies": [], "depth": 1}, {"id": "frfrr9i", "text": "The trick is to not get over-leveraged. Some of our owners have deferred debt payments. Others had either revenue streams or backup savings to move through the crisis. Everything you build, I don\u2019t care what it is, is a house of cards.", "replies": [{"id": "frg52zf", "text": "meh. Ofcourse you shouldn't overlever but really banks that lend to commercial real estate owners are willing to work with you versus automatically foreclosing like residental\n\nremember: if i owe the bank $100k it's my problem. If I owe the bank $1 million, it's their problem", "replies": [{"id": "frg7jby", "text": "&gt; remember: if i owe the bank $100k it's my problem. If I owe the bank $1 million, it's their problem\n\nplease stop perpetuating this bullshit line. It's always your problem.", "replies": [{"id": "frg7syg", "text": "Definitely not bullshit\n\nAll depends on how you structure the deal. Recourse vs non recourse loans. The expertise of that asset class. What does a bank know about cold storage facility or data center facility market positioning?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "frfuu0e", "text": "What type of property is it?", "replies": [], "depth": 1}, {"id": "frfy1kb", "text": "I guess it depends on the asset class. Our multi-family portfolio has been performing without a bump in the road to date. Collections remain at all time highs. We are assuming we are a lagging indicator but can still sustain significant drop in occupancy before we are close to break even/not being able to cover debt service. This is also with 75-85% leverage.", "replies": [], "depth": 1}, {"id": "frg3vvu", "text": "You are smart for seeing the red flags. Agreed on leveraged investors getting destroyed. This is just starting and its going to be painful for next 2 years.", "replies": [], "depth": 1}, {"id": "frg7lpa", "text": "I understand what you're saying about finding a good deal but to use a black swan event as proof that you're making a good decision is being overly cautious ... to a fault  !!!!\nAlso comparing today's market to 2010 (which was the very bottom of US RE market, in it's history) is silly.\nI get it, the market is hot and deals are excruciating to come by and I get it, covid is happening but to use 2010 and covid as to why you're not going to invest is simply ridiculous.", "replies": [], "depth": 1}, {"id": "frg7oni", "text": "Great job on not being in a hurry to FOMO into a bad deal. That\u2019s step one. \n\nBut to say bc of recent events you\u2019re walking away from CRE/multifamily is probably the wrong takeaway. \n\nAlso NYC real estate is where you\u2019re also going wrong. Investors are avoiding it like the plague. NY and CA have experienced the highest number of non paying renters. \n\nWhy? \n\nBc the state and local governments there are ludicrous. They give more rights the tenants than the owners and tenants know it.\n\nEdit: my multifamily portfolio has been collecting over 95% last two months. I live in CA but invest in other states.", "replies": [{"id": "frgcdcd", "text": "In NY they changed the rental law one year before the elections. It\u2019s a political move at the end of the day.", "replies": [], "depth": 2}, {"id": "frgil1m", "text": "This is the correct answer. Consider that there are a huge variety of real estate product types (multifamily, office, industrial, single or multi-tenant, self storage, etc) and geographies (major metropolitan areas, secondary and tertiary markets). If you are only looking at NYC, it's like viewing the potential options through a straw. \n\nNot that you need to go all-in on real estate or be over-leveraged, but CRE is highly local. If things are overvalued where you are, they may not be in other markets.", "replies": [{"id": "frglwv8", "text": "Bingo.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "frl3ewa", "text": "This is going to be the best time to be in real estate when everything hits the fan in 6 months. You\u2019re not over leveraged so why not take advantage of better pricing ?", "replies": [{"id": "fryh64c", "text": "&gt;This is going to be the best time to be in real estate when everything hits the fan in 6 months.\n\nDo you think this applies to the NYC multifamily market, too?", "replies": [], "depth": 2}], "depth": 1}, {"id": "fryaoiz", "text": "I just adore commercial real estate but it's not for everyone all the time.  I think a place like NYC or as someone else mentioned, large metro areas in California can be so cyclical and saddled with so much regulation and taxes. \n\nI think a second or third tier market can be a better bet.  \n\nI feel very badly for what you guys are going thru, you did a lot of things right only to get walloped by this unpredictable event.  I feel lucky that my husband was at the very end of a project and not the beginning or middle, when this crap hit.", "replies": [], "depth": 1}]