Starting new projects with market concerns?

[cthorne03]

With the COVID-19 situation changing so quickly on a day to day basis, I am unsure about starting any new projects at this point. I will completing all existing projects because it wouldn't make sense to stop at this point but a bit nervous about starting anything new until things become a bit more clear.

Thoughts?

[Gold River]

Hi,

     I have millions of dollars in projects going in the commercial property spectrum, some are still operating on site and some have closed because we can not get inspections.

I am currently running about a 12% non payment percentage on top of a 6 to 7 percent vacancy factor, I am thankfully at a portfolio LTV of about 63 percent and build or remodel projects at less than 75 percent LTV. I am in a position of having reserves and a good cash position, but worry about tenants and business lease's as some of these people will go bankrupt because of this.

Those people who lost jobs or closed businesses we will not back charge them for their missed April 1st payment but need to evaluate month by month what were willing to do and write off. 

We will stop new projects temporarily but complete everything permitted and out of the ground.


                GR

[Alex Capp]

Great question, and definitely a concern of mine too. For us, we use OPM (other peoples money) for purchasing properties in Philadelphia, and then try the BRRRR method to pull all the money back out and pay our investors. The tricky part for that specific financing strategy with be estimating the final ARV since the market and prices are so up in the air.

However, new opportunities will be popping up too. On the other hand, I'm excited for lower prices and more deals that I expect to pop up on the MLS due to inventory sitting there longer now because less buyers in the market. Our thoughts for those are to go the traditional 20% down financing when it makes sense, bring in a money partner who doesn't mind putting that 20% down, and then giving them equity / cashflow in the deal.

Hope this helps! Good luck