I’ve been saying it!
The next niche to face some troubles would be commercial real estate.
The next question becomes does your ‘brick and mortar’ make sense as an investment?
In 2008 we saw the subprime mortgage meltdown mainly including single-family residences. There were thousands, upon thousands of properties that we sold either via short sales or foreclosures.
This time around we are seeing a different animal. This time we are perhaps going to see the CBMS – Commercial Backed Mortgage Securities. Because of the COVID impact on small businesses many cannot afford their rent, nonetheless pay their employees. While it does not have a sole effect on just the business, but also the property owner and the lender against that property. It is a ripple effect affecting many paths without discrimination.
Senior housing has taken a huge hit, as many residents had fallen victim to the COVID spread. It is extremely unfortunate that many seniors along with those already immunocompromised. And its just not the Residents, staff have also been contaminated with illness.
It is really sad to see. Our most frail citizens taking the hardest hit.
As senior housing in order for its existence, there need to be Residents, if there are no Residents there is no Senior Housing.
How do you move forward as an investor?
As an owner-operator – business owner
Very cautiously. Without sounding insensitive, people will age and they will need care. Have that tough conversation with the property owner. Negotiate a payment plan of some sort. By any means DO NOT take advantage of the situation for financial gains! This would be detrimental to your tenant-owner relationship. Take all precautions necessary to ensure the safety of all your staff, yourself, and most importantly the Residents.
As a property investor – leasing to an operator
Being as accommodating as possible. If there is anything that I have learned in the Senior housing realm is that there plenty of expenses that are required in order for the operation to be successful. And the staff is the critical piece of the equation that must be met without cutting corners. Work out a payment plan of sorts with your tenant in order for both to accomplish what it is that is needed in order to move forward as best as possible. Even if means, restructuring your loan.