A Perfect Storm for Real Estate Entrepreneurs

Posted on Dec 21 2015 - 6:49pm by Lance Edwards
Lance Edwards. President, First Cornerstone Group, LLC.

Lance Edwards, President, First Cornerstone Group, LLC.

BY LANCE EDWARDS— The economic uncertainty that we are faced with right now has created huge opportunities for real estate entrepreneurs. Real estate entrepreneurs need to have the mindset to identify and see those opportunities. The economic crisis has created a Perfect Storm of opportunity for those involved in real estate investing.

Apartment rental demand is increasing. Fewer people can qualify to own homes and people are losing their homes to foreclosures. This cost-conscious environment is causing a downsizing in the housing market.

People in the larger houses are moving to medium houses; owners of medium houses are moving to smaller houses and those in small houses are moving into apartments. Class A apartments go to Class B; Class B goes to Class C. The problem is no one is building any new Class C properties so the progression is moving into current Class C properties.

At the same time rental demands are increasing, the supply of private money is increasing. The money that was in the stock market has exited the building and is temporarily taking safe haven in things like CD’s, and Money Markets and only earning 1%. That was just a temporary exodus to find a safe haven for the money.

The people that have that money realize that earning 1% is not going to allow them to recoup their losses within the next generation so they are looking for alternative investments that are safe and conservative to earn something better than 1%.

This is the environment with private money right now. You are talking about income-producing real estate as a huge private supply looking for our deals. The planets are aligning for your Perfect Storm.

Now, there is a third aspect here. Private financing is at its lowest rate in 50 years. For example, look at home mortgage rates. They have now slipped below 5%. They are in the 4% range now. The last time mortgage rates were in the 4% range was in 1961.

Here is a report that came out in October from Pricewaterhouse, Coopers and Urban Land Institute Real Estate 2009 Report. It says:

“Distress in the housing market is benefiting the apartment market. Moderate income apartments (that is Class C) in core urban markets near mass transit offer the best buy – a trend that carried over from the previous year.”

So these three things together, increased apartment rental demand, excess supply of private money and lower financing rates, add up to a huge opportunity for you. You have the ability to take advantage of this current economic state and actually make money in the downward spiral. Do not let this Perfect Storm of opportunity pass you by.