The real estate market is constantly changing. An investment strategy or market area that was once considered ideal is now dried up. Hence, to be a successful real estate investor, you should identify the present market opportunities while having the flexibility and foresight to know what to invest in and when to take advantage of the investment.
Though 2020 was a challenging year for real estate, there’s still an opportunity for prime real estate investing. To help you invest wisely, we bring you the five biggest real estate investment opportunities that will be trending in 2021.
Adaptive Reuse of Unwanted Commercial Real Estate Space
Adaptive reuse is the conversion and redevelopment of unwanted real estate. In other words, an office or restaurant, into a different kind of real estate that offers better current and future market demand. Courtesy of the COVID-19 crisis, office buildings, hotels, entertainment venues, and retail were severely impacted. Though the recent re-openings have helped subside the impact, low demand has led to businesses’ shutdown. Yes, recovery will happen. However, it’s going to take time (probably the entire 2021), and property owners suffering in this turmoil have to get creative in the meantime.
Though commercial real estate witnessed a decline, affordable housing and industrial real estate remain in high demand. So, property owners should consider turning a hotel in the city into an affordable housing project or an old retail building into a warehouse or an industrial distribution center. There are definitely many hurdles to the transformation process, but there are many long-term opportunities here.
Buying Rental Property from Tight-Strapped Landlords
Not all rental markets are witnessing an uptick in demand and rental rates. Due to the pandemic, high-density urban areas are experiencing a mass exodus of residents moving from populated metro centers to budget-friendly home spaces in the suburbs. Also, eviction moratoriums have left thousands of landlords under extreme stress. Can’t evict a non-paying tenant, but still responsible for maintaining the property, paying taxes, insurance, and mortgage.
Many landlords that are tight-strapped will eventually consider selling. That’s when investors with patience and capital can buy these rental investments at a discounted price point.
All investors don’t have the capital at their disposal to buy real estate. Such investors can look into investing in mortgage note funds and real estate funds.
Already there’s talk of a potential foreclosure wave coming in 2021. Pending no national foreclosure moratoriums or protections enacted by the Biden administration. In October 2020, 4.57 percent of all residential loans were ascertained to be 90 days or more delinquent. According to Black Knight (NYSE: BKI), this figure equates to about 2.258 million, and that’s excluding the 202,000 forbearance plans that were set to expire in November 2020.
Lenders and servicers are under tremendous pressure to maintain these debt obligations. Hence, the government uses quantitative easing, slow and steady influx of cash into the financial markets to keep them afloat. However, this strategy can only last for so long, and banks will eventually be forced to either foreclose on the delinquent loans or sell the loans at a loss. The mass sale of delinquent loans is the easier route. They get the cash they want and need now.
The foreclosure wave that occurred after the Great Recession caused the sale of millions of non-performing mortgages on the secondary market. Large and small investors were able to purchase these loans at steep discounts. However, foreclosures take time, and investors waiting for a sudden surge in foreclosure properties to hit the 2021 markets miss the real opportunity.
It’s wise to invest in a mortgage note fund, like MWMfund. A real estate fund like this provides investors a chance to invest for profit and purpose; while having a chance at double-digit returns. The company’s mission is to provide investors a chance to earn passive income while helping families keep their homes by providing affordable housing. Working with each family to provide affordable housing, and get them back on their feet.
Hence, with a mortgage note fund you won’t need the capital to buy a property, but enough to invest in a mortgage note. Paying mortgages will give you a chance to earn passive income, while non-paying mortgages can open doors to achieving real estate at steep price points. Either way, this option provides an opportunity for people to invest for impact and income, building wealth and making a difference in the community.
Industrial Real Estate Investment
Industrial real estate has been considered one of the best-performing commercial real estate sectors for several years. To clarify, this is based on demand and returns. Furthermore, the global pandemic has fueled industrial space demand, putting pressure on warehouses and distribution centers, cold storage, and data centers. Due to this recent demand, a temporary surge is expected to appear in this sector, which will continue to grow in 2021.
The fix-and-flip market was extremely active in 2020. There were initial concerns about another real-estate bubble but were quickly brought to rest as home values increased dramatically. Plus, demand outpaced supply in most markets. By the end of 2019 and the beginning of 2020, fix-and-flip activity was up, and profits were down. But things reversed in the second quarter of 2020. Some investors took a step back from the market to see how the COVID-19 pandemic would play out.
Considering that demand for newly renovated homes remains high, 2021 will be another active year for investors looking to fix and flip. As an investor, you will need to be diligent with numbers, as the hot real estate market will bring investors back to business, increase competition, and lower returns.
The Bottom Line
To sum up, these five investment sectors hold the most opportunity in 2021. But, everything could change quickly. This year can play out to be a very profitable year for investors who are well-informed and ready. Investors should always conduct their own due diligence about each investment. Seek assistance from consultants for guidance.
Click here to learn more on the best ways to get started in real estate investing in 2021. Need help to get started with mortgage note investing? Reach out to us at firstname.lastname@example.org. Also, check out The MWMfund Learning Center for more educational content.
Have any questions on mortgage note investing or MWMfund? Schedule a time to chat with the MWMfund Co-founder and CEO, TJ Osterman.
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