Buying & Managing Real Estate – Lessons I’ve Learned From 2020

Saying that 2020 was a challenging year is a major understatement, considering what we’ve all experienced doing the past year. When the COVID pandemic hit in March, there was uncertainty of what might happen due to the mixed messages we were receiving at the time. Once the scope of the virus was clear, many predicted that multifamily investments would suffer due to high vacancy rates, delinquencies, and a variety of other negative outcomes.

There were also predictions of major price discounting of multifamily properties, which caused many investors to take a “wait and see” approach instead of taking advantage of excellent opportunities that were available. Fortunately, many of those negative predictions never happened (well, at least not yet). Rents remained stable, vacancy rates experienced a small rise, but nothing compared to the levels that were forecast. In fact, we even had remarkable rent increases at some of our properties during the pandemic. Fortunately, the anticipated “fire-sale” prices due to sellers’ panicking didn’t materialize either.

Despite all that transpired during 2020, I did learn some valuable lessons regarding buying and managing multifamily real estate. I will carry these lessons forward in the coming years and will share them with you now.

Lesson #1: It’s Still Very Much a Seller’s Market

One would have imagined that the pandemic of 2020 turned the multifamily market into a buyer’s market. With all the uncertainty and economic chaos that the COVID pandemic produced, you might have expected panic selling of assets and buyer’s picking and choosing from a variety of “fire-sale” prices. Fortunately, that never happened, and it’s still very much a seller’s market.

If you think back to the months of March through May, the market basically froze. Since buyers were expecting prices to drop, and sellers were unsure of what the pandemic would do to their properties, nobody acted, and it was a frozen market. However, from May on it was a market similar to the previous year when there wasn’t a pandemic – and it became a seller’s market.

Even during the height of the pandemic, it was a seller’s market, with property owners asking high prices and wanting to see hard money deposited with their escrow company. That has not changed due to COVID, and sellers are receiving multiple bids on every deal, with multiple buyers to choose from.

One example was a multifamily property that was on the market in Dallas Ft. Worth. It’s a highly competitive market, but we were very interested in bidding on it. I received a call from the broker stating that we were potential buyer number 37, which means there were 36 other bidders interested in the property. That shows just how strong a seller’s market we’re in, even during a pandemic.

Lesson #2: Patience is a Virtue