Updated: Mar 7, 2021
COVID-19 has disrupted just about every aspect of our lives, from working from home to distance learning, to restrictions on businesses, to mandates on wearing masks. The pandemic has also disrupted the real estate industry, and passive investing as well. I’ve noticed that many passive investors have decided to sit on the sidelines and wait for COVID to be over before investing any money in multifamily properties. I always tell investors that if they feel uncomfortable in any way about investing, they should honor their feelings. But investors were able to make money in many different investment opportunities, and sometimes you have to be creative in order to make the deals work. People made money when the economy was strong, and people lost money when the economy was strong. The same applies to a market downturn.
There are three main things that investors must consider when they invest in real estate, and this is especially true during COVID.
Consideration #1: Sponsor’s Experience
One question I’m frequently asked by new investors is, “How are your properties doing during COVID?” That’s a legitimate question, and one I would ask myself if I was a new investor thinking about investing during COVID. The sponsor’s response will be all telling: are they upset about the questions, or do they try to avoid providing an answer? If they are not comfortable talking about their performance during COVID, then it’s not someone I would want to invest with. A sponsor has to be willing to talk about the negatives as well as the successes. Measure how comfortable the sponsor is in answering uncomfortable questions. If they’re upfront and honest, it’s someone you would want to invest with. It’s all part of vetting the sponsor.
If you invest with a sponsor, you want that person to call or email you to let you know how things are going. Pay close attention to their response to see how comfortable he or she is in answering an uncomfortable question. If you ask how properties are doing during COVID, and their answ