Opportunities & Challenges of Investing in Real Estate

Real estate continues to offer attractive ROIs for investors, but where might some of the better-performing investors be focusing their attention in today’s real estate market? In this episode, Mitch Rosen, Senior Director of Real Estate at Yieldstreet and Adam Luysterborghs, Managing Partner at Avant Capital join up for a conversation about investing in real estate. Mitch and Adam discuss NYC versus pro-growth America real estate, supply disruptions and transitory inflation, and the non-performing loan market.

Traditionally, New York City has offered exceptional transaction velocity, allowing investors access to high-value real estate, easy access to comps within the deep market and data that offers meaningful insights into the value of loans. Recent regulatory changes in New York City have made it more difficult for building owners to create value in rental properties, but that hasn’t slowed investors down. While Avant Capital has only made four loans in New York City in the last two years, their approach to diversifying investments has continued to present opportunities for investments. Investors today are looking for new and profitable avenues to deploy capital beyond New York City, and have found favorable opportunities in pro-growth, low-tax environments like Texas and Florida. And while Adam has plenty of reasons to feel confident about the opportunities available in these up-and-coming investment locations, Mitch has a bullish and cautiously optimistic outlook that is still firmly planted in New York City. Who is right? Possibly both of them, but only time will tell.

Next, Adam and Mitch dive into the supply disruptions and transitory inflation that have had a surprising impact on commercial real estate recently. Up to 30% of the $2.5 trillion in excess savings from the pandemic is expected to be reinserted into the economy over the next year, creating potentially favorable opportunities for investors.  However, the increasing price of oil and other macro-level factors are also creating greater uncertainty as to what is going to happen next in the market. Regardless of these uncertain factors, at the micro-level, investors need to be making good decisions today.

Unlike the stock market, which is a daily market, historically, the real estate market has greater and longer lags both on the downside and on the upside. One major adjustment that is going to have to be made in the aftermath of the pandemic is in commercial real estate… or is it? Mitch argues that most companies will still be required to keep a similar footprint in their office space regardless of how many days of the week employees are actually in the office.

Another concern for investors is the increasing costs of materials and labor that are requiring investors to supply an additional 2-5% equity just to develop the same piece of land. Adam shares the sobering costs and stresses that builders are facing today and the far-reaching effect that these increases are having on commercial real estate. And while many have speculated on the feasibility of converting office space into short-term lease rentals, hotel-style, a comparison of the value of investing in short-term versus extended duration CRE shows that there is a preferable approach between the two.

Finally, this insightful conversation surrounding real estate investments wraps up with a look at the opportunities and challenges of investing in non-performing loans, whether hotels appear to currently be a wise investment, and what investors can expect to see in the future from some of today’s highest-yielding and potentially more rewarding segments of the real estate investment market, demonstrating how investing in real estate with Yieldstreet has the potential to take your money to the next level.

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