In part two, we discuss three more investment strategies property investors should consider after COVID-19.
In times of economic uncertainty, it’s the tried and tested strategies that keep the best investors, like Ray Dalio, speeding on the highway while others are rattled by bumps on the road. Even so, the latest bump, the coronavirus, has many property investors wondering what strategies to turn to.
That’s why last week, we looked at the first three fail safe property investment strategies investors should consider after COVID-19:
- Focus on what’s in your control
- Refresh your assumptions on property investment
So, while the property market gets its hands back on the wheel and our economy tries to correct itself from COVID-19, let’s check out the next three fool proof property investment strategies you might consider after the coronavirus.
4. Deleverage: Increase your equity and your control
More equity in your property allows more control over your destiny. So, deleveraging a property investment may be a smart way to overcome the impacts of COVID-19 on the property market.
Lower Loan-to-Value ratios (i.e. the loan as a percentage of the property value) means you become less impacted by interest rate changes. You also have less exposure to bank demands, because their interest – or share – in the property is reduced.
In a pre-coronavirus world, we might have been gearing our own properties at around 60 per cent of the property value. We think that will start dropping, perhaps to 45 per cent or 50 per cent, so we can make bigger, better decisions – and more of them.
5. 10x your due diligence and your investigations
Investors should only rely on cold hard facts. It’s no longer safe just to assume.
So, in your due diligence investigations, question everything. And then take those answers, and question them again.
For example, is this tenant an essential service? Or could it fail in a pandemic-like environment? Is the market underdeveloped? Or is it likely to withstand any whacks the next decade may throw at it?
Be on your toes. Drive the assumptions out and replace them with sureties.
6. Wait until the timing and opportunity are right, but don’t overlook your own portfolio
Many investors of commercial property are holding onto their investments. Commercial landlords aren’t selling their assets as fast as shares or residential property investors. But there are always opportunities out there for willing and able buyers.
We are always inclined to dive in and really pull apart what someone may see as “risk”, and look at it on a different angle.
If that’s you, perhaps start by looking for property where the landlord has undervalued its tenant. There may be more future worth in little old Joe’s Fruit & Veg Supermarket than other buyers think.
Wait for opportunities and wait for the right time to pursue them.
But while you wait – and this is most important – look after what you already have.
Your existing portfolio may have some of the best opportunities right now. Anything from looking after your tenants to reviewing your financial arrangement can help increase the value and security of your current investment.
At least until the next bump in the road.
For more information on how to invest alongside us in commercial real estate, get in touch with Properties & Pathways today.