With many renters may not be able to pay rent during the COVID-19 pandemic, some landlords are going to struggle with the mortgage, which means an opportunity for some property investors, according to Marketplace [1]. Daniel Lebensohn, co-founder of the investment firm BH3, said buying distressed debt during the last financial crisis built the foundation of his company.
“Now’s the time to innovate and go hunting because there will be opportunities,” Lebensohn said.
Meanwhile, KC Conway, chief economist at the CCIM Institute, thinks market changes will come in two phases.
“Phase one is really a repricing opportunity. And I think then the acquisition comes a little bit later, maybe six months down the road,” he said.
Jim Costello, SVP at Real Capital Analytics, told Marketplace that the investment surge could get there at some point, but it’s just not there yet.
“It’s not as if anybody who owns anything is suddenly going to step up and say, ‘Oh, sure. A month ago, I could have sold this building for $400 a foot, but because I’m afraid of what’s happened in the market, you can buy for $200 per square foot,’” Costello told Marketplace.
As the administration looks for a path forward for the national economy, one policy change that could ultimately lead to a boost in investment for infrastructure and jobs is the repeal [2] of the Foreign Investment in Real Property Act (FIRPTA), according to at least on tax expert. In fact, several members of Congress had already called for the repeal of a particular section of the act prior to the partial economic shutdown this spring.
“Rolling back FIRPTA will result in a much-needed influx of billions of new, debt-free financing for everything from new roads to multifamily housing,” stated Alex Hendrie, Director of Tax Policy at Americans for Tax Reform, in an article published Wednesday in Real Clear Markets [3].
The Foreign Investment in Real Property Act places higher taxes on foreign real estate investors than domestic investors. The act was expanded in 2007 to apply to real estate investment trusts (REITS).
“Specifically, REIT liquidating distributions to domestic shareholders are treated as sales of stock, while such distributions to foreign shareholders are treated as capital gain distributions,” explained a letter several senators sent to the Treasury [4] in December requesting the repeal of that particular section of the Foreign Investment in Real Property Act.