A Simple Way To Compare Investments On A Risk-Adjusted Basis
Do you compare real estate investments on a risk-adjusted basis?
At RealCrowd, we believe the way to make better investment decisions is to Start with Risk.
Once you understand the risk, it becomes an easier task to compare the potential rewards of the investments and make a decision that is most aligned with your investment goals.
The challenge for investors can be both knowing how to quantify the risk, as well as having the time to assess the risk of all the opportunities you have interest in.
Which is why we launched ReAllocate, a Registered Investment Advisor, that quantifies the risk of real estate investments for you.
How Does ReAllocate Risk Quantification Work?
At a macro-level we focus on the five factors of risk in real estate: (1) Manager, (2) Market, (3) Capitalization, (4) Asset, and (5) Partnership Structure.
Underneath these five factors we quantify and score over 200 micro-factors to give you the Risk Assessment Scores you see in the picture above.
To learn more about how you can start to use ReAllocate to quantify the risk of real estate investments click Learn More below.
|Rent Payments Collected by April 27th||95.9%||91.7%|
|Rent Payments Collected by May 27th||94.8%||93.3%|
|Rent Payments Collected by June 27th||94.7%||94.2%|
|Rent Payments Collected by July 27th||95.3%||93.3%|
|Current||Prior Week Change|
|10 Year Treasury||0.551%||-0.036%|
|Total US COVID-19 Cases||4,496k||+434k|
|Total US COVID-19 Tests||53,830k||+6,610k|
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What’s Happening Now
We had all wondered what the final toll would be for the Q2 GDP and we learned on Thursday that it was bad. Really bad. The US Economy shrunk a staggering 9.5% in the quarter, greater than any quarter in modern times and annualized to 32.9%. The annualized number is (hopefully!) a bit sensationalized since it’s very unlikely that the dramatic drop will play out in Q3 given the rebounds in hiring that we’ve seen so far.
We’re far from out of the weeds, however. That’s a BIG hole to climb out of, and we have very little clarity on what the continuing stimulus packages will include or how they will continue to prop up the overall economy.
In the real estate space, this week the HOPE Preferred Equity Facility was proposed (keep an eye on H.R.7809 for more info as it comes in) that would provide a rescue facility by the Treasury to guarantee certain CMBS loans. Given the recent rise delinquency rates on the CMBS loan pools, this would be a major win for commercial borrowers.
On the other side of the coin, I had a conversation with a multifamily manager this week who locked a loan at a 2.5% rate, interest only for the life of the 10 year term. Crazy.
Given loan options like that, it’s no wonder we’re continuing to see an uptick in activity on the marketplace, sponsors are starting to buzz with activity again and we’re seeing more COVID discounts baked into properties.
What To Watch
All eyes are on what comes out of Congress for the next stimulus package. There’s no question that the incredible amount of money that has been pumped into the systems thus far has prevented that 9.5% GDP drop from being even worse. But what’s certain is the fragility of the little “r” recovery we’ve seen so far, and how instrumental additional stimulus will be in preventing a further economic slide.
We still have a long time to go with this crisis with several states continuing to ramp up in case counts. It feels like there’s a collective reaching-the-end-of-the-rope tone with many people I hear from these days, particularly because it’s so easy to lose sight of the good that is still around us with the constant bombardment of bad news.
Try to take a moment to think of a few things to be grateful for over the weekend. Take a walk through the woods, cook a nice meal or have a conversation with a friend and genuinely ask how they’re doing. It’s good to remember that we’re all in this together and that’s the only way we can make it through this.
Stay safe out there!
-Adam Hooper, CEO
Investor Sentiment Survey
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Reimagining Real Estate
Michael Beckerman, Founder of The News Funnel and CEO of CREtech, joined us on the podcast to discuss how real estate is being reimagined through the adoption of the latest technology and innovation.
Paul Kaseburg, Chief Investment Officer at MG Properties Group, joined us on the podcast to discuss the story that numbers can tell about a real estate deal.
Key Articles To Read This Week
The company had previously said most employees would be working remotely through the end of 2020, with some employees being allowed back into the office sooner.
Coronavirus triggers steepest recession since World War Two
Some owners of smaller and private hotels must pay more for financing and take less for property sales
COVID-19 is making companies reevaluate their office space needs. Some are opting for consolidation.
Co-working company pitches flexibility amid business uncertainty wrought by the coronavirus
Industry groups have responded to a proposed bill that will help distressed CMBS borrowers remain current on their loans.
Simon’s and Brookfield’s investments in bankrupt tenants are relatively small. But the deals can give them critical control of the real estate involved.
*If you like this post, be sure to enroll in our free six week course on the fundamentals of commercial real estate investing — RealCrowd University.*