The COVID-19 pandemic hit commercial and luxury real estate harder than most other RE segments. We saw aid from the Federal Reserve and Congress go toward businesses, workers, municipalities, residential homeowners, and tenants to the tune of more than $4 trillion!
CRE saw little of that. Instead, vacation rentals dried up. New regulations and job losses made collecting rents from tenants a nightmare.
This is particularly true in hard-hit states like New York, California, and Florida.
In this interview, 1031x director Sean Ross speaks with Florida broker Caryn Botknecht, who addresses
- The role of technology in the recovery
- Why “absolute NNN” assets should be on investors’ radars
- Sustaining multi-generational wealth
- How other brokers should adapt to uncertainty
Plus lots more.
Let’s dive right in.
Hello, Caryn. Can you tell us how your business (and your clients’ businesses) have performed since COVID-19 hit?
Caryn: This was a world that no one saw coming. Of course, we saw Buyers and Sellers panic a little. As your readers no doubt felt, there was plenty of uncertainty.
And then people started adjusting. Markets began reopening.
Then the second wave came. Now we’re going through a brand new cycle.
Fundamentally, real estate had its ups and downs but it isn’t going anywhere. Our Buyers are finding opportunities and our Sellers are capitalizing on increased (and pent up) demand.
Being a technology-based brokerage really helps.
We have a lot of unique ways to show homes virtually! Virtual open houses, virtual staging, Matterport tours and FaceTime/Zoom tours are standard these days.
Do you see a bigger impact in residential or commercial markets?
Caryn: Our Commercial Group Division saw the CRE space get put on hold faster — more Buyers looking for distressed opportunities on commercial projects nationwide.
Residential seems to be delayed as opposed to distressed. Of course, many residential deals aren’t strictly driven by analytics (unlike commercial). People tend to fall in love with residential properties; residential real estate sometimes lacks the same incentives to go bargain hunting.
Also, people often have to move for life reasons, regardless of investment timing.
However, the decreased inventory created more demand for specific properties than we’ve experienced in South Florida in quite some time.
Where do you see opportunities for investors? (Or where do you see pitfalls?)
Caryn: Investors can find tremendous opportunities in the “absolute NNN market”.
Businesses that have been designated as ‘essential need’ are thriving (and likely will continue to).
Passive investors in particular might be leery of the stock market. After all, we’ve seen two pretty devastating market drops in the past decade or so. On top of that, valuations seem fairly detached from reality.
There are other ways to get more passive and safe investment. NNN real estate is where I recommend people look.
1031 exchangers are interested in (A) saving taxes and (B) creating generational wealth. What other strategies or resources can you recommend around these topics?
Caryn: There are a number of opportunities I see happening with investment funds (like IRAs).
My specialty is high-end real estate. But I network with really smart people from all over, and there are many ways to purchase assets and defer, reduce, or eliminate tax liabilities.
1031 exchanges are one such option, of course.
Other than real estate, I would suggest any readers to speak to their trusted financial planner. The best strategies are always specific to the individual portfolio and circumstance.
For generational wealth (and how to create it)…
Some tips for creating and sustaining multi-generational wealth:
➜ The earlier you include the younger generations in on the plans, the better off families tend to be. It doesn’t take many bad apples to spoil a bunch.
➜ Incorporate diverse asset classes, including types of real estate.
➜ Manage taxes intelligently. Saving 5% on taxes is the same thing as earning an extra 5% in returns.
➜ Deliberate and make patient financial decisions. Chasing fads is a dangerous game. Again, this is one reason that well managed real estate is so important.
I serve as a resource to my clients for all of their real estate needs so they can have one point of contact for their entire portfolio.
How do you and your our team review properties and source deals while remote? Advice for other brokers out there?
Caryn: There are many great networks and sources to help provide deals around the country. The best agents can consistently identify which ones will bring value to your clients.
Know your client’s needs. Very clearly.
This is step one.
Every client has very individualized needs. Be clear about what they are, and keep them in focus. Clear communication is so very important!
In other words, the basics really matter. Not everyone masters them.
From there, it’s important you work with a network of valuable individuals whom you trust to bring your clients new opportunities (especially those that have not already been shopped around).
Build relationships with those trusted networks, and keep them. The best agents and brokers are able to (A) source great information and (B) trust the information they receive.
Follow up with your additional research in order to present your client with a thorough picture of the deal.
You’ve done a ton of philanthropic work — Make-A-Wish, The Red Cross, The Nature Conservancy, among others. Tell us about that and how did you transition to real estate?
Caryn: I’ve worked with a number of high net worth individuals for many years in a position of trust and authenticity.
That started as a Major Gift Fundraiser which led to a pretty seamless transition to luxury residential and commercial real estate.