We don't mean to scare you, but while Halloween looms, the holidays immediately follow, and then, before you know it, 2022 has arrived.
That makes now a good time to think about how your real estate investments are doing and what you might want to do about them, given current and potential future conditions such as inflation, the return to the office, housing prices -- you name it.
To help shine a light into the tunnel ahead, we asked a couple of folks with serious skin in the game this single question: What commercial real estate (CRE) moves would you recommend making before 2021 comes to an end and why?
First, from the chief strategist at a big CRE marketplace
Eli Randel is chief strategy officer for Crexi, a CRE marketplace and data platform that has attracted millions of users while helping buyers, tenants, and brokers transact and lease on over 500,000 listings -- for a total of more than $1 trillion in property value -- since its founding in 2015.
"For the novice, I think building a portfolio of strong REIT (real estate investment trust) investments offering dividends is a good way to beat, or at least keep up with, inflation," says Randel, who joined Crexi in 2016 after working as a director of capital markets at Cohen Financial, launching Auction.com, and serving as director of dispositions for the big single-family rental REIT Invitation Homes.
Randel says to look for REITs with mid-single-digit returns and features that pass through potential inflation in their operating expenses to their tenants. A good example of that would be REITs that focus on tenants with triple net leases.
"The value of some of these opportunities feels reasonable today with opportunities for capital appreciation and dividend growth. Additionally, these investments offer liquidity," Randel says.
As for property owners and more experienced investors, Randel says, "I would get a grasp on operating expenses, which are also subject to inflation should that continue. I would also get a grasp on my capital stack and, in some instances, consider refinancing property as a) interest rates may slowly begin to increase, and b) debt also erodes with inflation, meaning what you owe will become eroded if inflation arises."
He says that doesn't mean to over-leverage assets, "but for safe and stable assets, I would consider refinancing deals to fix today's rates and pass 'inflation taxes' on to lenders."
And now, from the founder of a CRE crowdfunding frontrunner
Jilliene Helman is co-founder and CEO of RealtyMogul -- the online crowdfunding platform that says it has now underwritten and invested more than $400 million in CRE properties worth more than $2 billion on behalf of more than 175,000 individual investors who have joined since its founding in 2012.
Helman's first tip is for would-be CRE investors to go ahead and dive in. "Rapid changes to our economy have produced plenty of unique opportunities in commercial real estate -- from multifamily projects in America's fastest growing cities and suburbs to warehouses and distribution centers for e-commerce retailers, to life sciences complexes that are taking over traditional office buildings; to destination retail complexes that are seeing higher foot traffic than ever before."
She also recommends investors looking to offset capital gains consider plunking some of that cash into an opportunity zone. (There's an important deadline arriving on Dec. 31 for those investments in a qualified opportunity fund.)
And speaking of year's end, Helman advises real estate buyers to seek out deals that have to close before 2021 is history. "Real estate is inherently an irrational market and there may be sellers willing to sell for cheaper in order to close before year-end for their own personal tax reasons," she says.
And speaking of taxes, the RealtyMogul CEO also advises checking out whether you can use depreciation to offset taxes on ordinary income. "There may be an opportunity to hyper-depreciate assets you already own, or to invest in a partnership that shares depreciation on your K-1 to offset ordinary income," Helman says.
And finally, take a look at your overall portfolio to determine whether all those gains in the stock market and other assets this year have made this a good time to buy and sell to ensure you have the appropriate allocation to CRE for your situation, tastes, and comfort level.
The Millionacres bottom line
"There's never been a better opportunity to allocate a portion of your portfolio to commercial real estate. And it's never been easier to do so," Helman says.
We agree. The RealtyMogul mogul says you can make buys in a crowdfunding platform for as little as $5,000, and we'd add that you can do the same for as little as the price of a single share of a publicly traded REIT.
Just get started.