For commercial real estate investors, the market outlook is uncertain. The United States is currently adjusting to a pandemic, and a sizable portion of the country’s population is entering retirement, placing downward pressure on property prices. In today’s economic climate, commercial real estate investors are forming fix and hold strategies for properties in their portfolios.
The Silver Wave
Over 60 percent of homeowners in the United States are 65-years-old or older. People in that age group are inclined to move out of their current residences to new homes or retirement communities. This “silver wave” is an opportunity for commercial real estate investors to purchase residential properties to expand their portfolios. However, despite an uptick in residential property sales over the past four years, the coronavirus along with the current economic landscape are causing a market contraction in the residential property sector. Commercial real estate investors need to rethink how they are going to generate revenue from residential properties in case fewer people are buying homes over the next few months.
Fix and Hold
Fix and flip projects have been the most accessible ways to generate revenue for commercial real estate investors. The concept is simple – purchase a property for a low price, make renovations to bring it up to code, while making the house both functional and aesthetically pleasing to potential homeowners, and then list the home on the market for a higher price. Fix and hold still follow the first few steps as a fix and flip project, but instead of listing the property, commercial real estate investors hold onto it until market prices increase so a profit can be made.
Generating Revenue with Fix and Hold Properties
Implementing a fix and hold strategy can still generate revenue. Between the COVID-19 pandemic and people looking to reduce expenses, it is very likely that commercial real estate markets will favor rental properties for the next few months or even the next few years. Commercial real estate investors can convert their fix and hold properties into rentals and generate revenue from tenants. Keep in mind that more units will potentially bring in more rent, so duplexes, triplexes, and even mansions that have been converted into multifamily rentals can generate revenue that far surpasses mortgage and property tax payments. This allows commercial real estate investors to generate revenue when the housing market is in a period of contraction. When property market prices improve, investors can get their rentals ready easily and list them for prospective buyers.
Financing Your Fix and Hold Strategy
Web Finance Direct offers a wide range of commercial real estate financing solutions for property investors who want to purchase, renovate, and rent out single and multifamily properties. Our experts will work with you to understand your objectives and guide you through the options that best suit your needs. If you are looking to leverage a fix and hold strategy for your properties, contact Web Finance Direct today to learn more about our commercial real estate financing solutions.