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There's no debating that 2020 brought about many challenges, in real estate and beyond. As real estate investors, it's not only important for us to be skillful in our strategy but also hopeful for a brighter year ahead.
With that in mind, we called on some of our writers to present their hopes and goals for the year ahead in real estate. Here's what they said.
Buy more land
My real estate new year's resolution for 2021 is to buy more land. Tremendous fortunes are made when somebody sees value in a piece of land nobody else does, and there are more opportunities than ever right now.
The greatest of these opportunities aren't advertised, though. It takes a lot of time and effort to find the deals, as well as a lot of trust in yourself to feel confident in your investment. My resolution is to dedicate the time and energy to hunting down these opportunities and make the commitment when I see the potential.
Market to off-market landlords
The start of the year is a great time to make lofty goals for yourself and your portfolio, but setting investment resolutions can be particularly challenging in a volatile, uncertain market. As a note investor, I specialize in buying and creating debt, and I see big opportunities coming in 2021 and beyond, particularly for nonperforming notes.
While many signs point to a strong residential real estate market in 2021, I'm far less optimistic about the future of the mortgage industry and real estate market and am preparing for a potential downturn by reducing risk, consolidating debts, and building liquidity by selling a number of assets in highly appreciating markets.
With that being said, I don't plan to simply sit on the sidelines and wait for what may or may not happen. In the meantime, I plan to actively market to off-market landlords and note holders who may be tight on cash as eviction or mortgage moratoriums are extended, hoping to buy real estate or mortgages at a discount.
When it comes to my real estate investment trust (REIT) portfolio, I'm continuing to watch for value buys backed by strong companies with long-term growth potential. I have open-limit orders for a number of REITs in the residential, retail, warehouse, data, and office sectors.
Give maintenance and contractors some TLC
I resolve to find and befriend skilled tradesmen in every area where property maintenance is an ongoing concern. And not just befriend them -- gift them. More experienced landlords probably have this built into their preholiday routine.
This definitely includes all trustworthy handymen. Why do I spend hundreds tipping doormen and housekeeping staff in NYC buildings but don't even think to send a gift card to the guy who hauled a new oven up two flights of stairs and then remodeled a countertop so the oven could fit? Yes, I paid him when he did the job, but I'll need him again, so why not send a token of gratitude?
This goes double for a reliable HVAC contractor, who I have not managed to locate yet but certainly plan to. In fact, that's my other resolution.
Expand REIT portfolio
As someone who's been investing for well over a decade, I own a fair number of stocks at this stage of the game. But one investment I'd like to go heavier on in 2021 is REITs.
Because REITs are required to pay out at least 90% of their taxable income to investors, their dividends tend to be generous. And since I don't own many dividend stocks, I like the idea of generating continuous income in my portfolio.
Of course, buying REITs will be tricky this year, as there are certain industries I won't touch with a 10-foot pole. Take mall REITs, for example. Given the number of retailers that have filed for bankruptcy or are looking at closing stores, I'm nervous to buy mall REITs until things improve on the pandemic front and we get a sense of which retailers will recover and which won't. I'm also not too keen on REITs that derive a lot of revenue from office buildings. Given the remote work trend, I can see offices being sluggish for quite some time.
On the other hand, I think there's a lot of potential in warehouse REITs. The push to online shopping makes warehousing a growing industry, so I'd be more comfortable seeking out investments in that corner of the market. I also think REITs that derive revenue from laboratory space are a good bet, seeing as how COVID-19 has sparked a need for drug and ongoing vaccine development.
Either way, I hope to add a number of REITs to my personal investment mix.
Keep an eye on opportunity zones
My resolution in regard to real estate investing this year also tracks the work I'm lucky enough to do for Millionacres and our readers: I'm going to keep a closer eye on the emerging world of opportunity zone investing.
It's not just an incoming Biden administration that makes me think this could be the year where opportunity zones start to get some legs. While it's reasonable to assume more attention and money will be paid to economically disenfranchised areas through grants and myriad tax incentives, that's only one factor among many.
We also will likely see more proof-in-the-pudding demands from lawmakers about what's being accomplished in those areas, which I think will prompt the qualified opportunity funds (QOF) -- the investment vehicle for those zones -- to be even more eager to put their money to work.
And that's what will make this year so interesting: watching to see how those investments come to fruition. This is a new area of investment, so reporting on their progress and profitability (or lack of same) is just now emerging, too. In fact, there's only one publicly held OZ real investment trust I'm aware of: Belpointe REIT (NASDAQ: BELP).
Right now, to invest in opportunity zones primarily involves direct investment in QOFs, where liquidity and transparency can vary but still promises potentially handsome returns on this new investment vehicle. It'll be worth watching, and I resolve to do that in 2021.
Diversify my portfolio
My 2021 resolution is to diversify my investment portfolio. I've got eyes on the REIT sector, specifically self-storage REITs. I usually scoff at anything referred to as "recession proof," but that's how self-storage businesses are often billed. And they've proven to be rather resilient during a pandemic, too.
There's nothing sexy about the self-storage business model, for sure. But the returns can be, and that's all that matters. Plus, there seems to be a lot of opportunity for growth in the self-storage industry, which is exciting.
I'll also be keeping an eye on home improvement stocks. With all of the pandemic-fueled renovation projects -- including a few of my own -- that sector has been booming. While I'm confident the coronavirus vaccine will enable us to spend more time outside of our homes this year, I think the home improvement trend will continue.
The bottom line
Though real estate overall may not have been the most lucrative investment sector in 2020, there are ample opportunities for investors to strategize for 2021. At least we know now that we're entering a year when a pandemic will continue to be top-of-mind.
Adjusting to this "new normal" mindset we've been forced into since March will allow us to make smart and Foolish investments this coming year.
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