How to Deal with Real Estate Uncertainty

Real Estate Heaven REH How to Deal with Real Estate Uncertainty

Hello, people. Welcome to the REH Real Estate Heaven Youtube channel. Generally, there’s always some uncertainty in real estate investment. Investment analysis and assumptions are usually inaccurate.

When investing in multifamily properties, there will always be some uncertainty, such as uncertainty in the future of the market and future on what you want to do with the property. Here in Real Estate Heaven, let’s delve into how to deal with such uncertainty. If you want more of this content, subscribe to the REH Real Estate Heaven Youtube channel and hit the notification bell.


The Uncertainty:

I invest in value-add properties, making improvements and renovations with the assumption that I will be able to increase rents once renovation is complete. Assumptions can be risky, but sound intuitive.


How to Deal With the Uncertainty:

Real Estate Heaven REH How to Deal with Real Estate Uncertainty HomeThe better the renovation process for the owner, the higher the likelihood of renovation success. I feel confident about future renovations if there are already good results in the past. 

When making a property investment, it is important to do research to ensure that the market is desirable. First, determine how close the potential investment is to other properties with a similar structure and amenities. Next, if data exists for when renovations were last completed on the property, compare this information to the comparable. Finally, always use conservative estimates when determining rent premiums so that you don’t overestimate.


The Uncertainty:

Looking at expenses and figuring out where to cut back on expenditures is essential if you want to increase your income. However, it’s impossible to foresee how much things will cost since they might unknowingly go up (such as in the event of HAVCs breaking).


How to Deal With the Uncertainty:

Real Estate Heaven REH How to Deal with Real Estate Uncertainty Fade40% – 55% of income is a good place to start when determining what to charge. You can also assess historical and market costs to help with the decision-making process.

We use two tools to assess the property: one is a walk-through with the property manager, who will provide us with an operating budget. The other is a CapEx budget that includes roofs, HVAC systems, appliances, and so forth.

Additionally, unexpected expenses, such as unpaid repair bills, can cause operating and CapEx budgets to go over. Include a budget for “additional expenses” in your planning to avoid these regrets. I suggest setting aside 10% of an estimated budget for unforeseen items.

Consider all existing vendor contracts, and request competitive bids if rates are rising or seem out of pace.


The Uncertainty:

Although, nobody knows the exact amount of occupants any given property will have. This is because the occupancy rate can change with market changes and new competitors.


How to Deal With the Uncertainty:

You should research the current market vacancy rate before purchasing any property. If you’re considering a property that’s 100% utilized, plan for an occupancy level of 5%. You can buy data from industry reports to analyze the market. These reports are expensive and usually only offered to property managers, but if you work with an established company, they may share some reports with you.


The Uncertainty:

You can attract tenants by reducing their rent, or giving them a free month of rent for the smaller unit. Rent discounts can also involve new appliances, painting, etc. at least you have someone on a long-term lease with the more updated unit.

Businesses need to offer incentives in order to grow in a market that has many competitors. To stay competitive, each company must continuously offer incentives if the market is flooded with rivals.


How to Deal With the Uncertainty:

Real Estate Heaven REH How to Deal with Real Estate Uncertainty QuestionTypically, companies must pay for information which contains the offerings of their competitors. By buying data with CoStar and YardiMatrix, you can learn what concessions you should offer in order to stay competitive.

You may find out that competitors are using an unethical promotion to attract renters. They offer a discount the renter can use at any point in their lease, rather than the first month. The renter will have 12 months of rent they are paying for, but they’ll get something back up front.

You can do a quick search for your competitors’ concessions or ask them about their specials. This is a good way to handle uncertainty in concessions.


The Uncertainty:

The uncertainty of an exit cap is one of the many uncertainties when investing in multifamily. After 10 years, the price is difficult to predict because you can’t predict what the housing market will be like then.

Exit Cap is figured by dividing the net operating income by the expected sale price. When your NOI is 500,000 dollars and the expected sale price is about $8 million dollars, your exit cap rate is 6.25%.

As a buyer, you should always be looking for the lowest possible price per NOI.

Just be aware that an Exit Cap is an estimate of what a property might sell for. There’s no single factor that impacts the cap rate, so estimating price is difficult. Remember to use these figures as guidelines for whether the investment is sound or not.


How to Deal With the Uncertainty:

It is difficult to estimate the exit cap. I usually assume that the housing market will be in worse shape when I sell it, compared to now. To account for this uncertainty, we usually assume a higher rate of return when we calculate the exit cap than the initial purchase. For example, if our investment property had a 5% cap, we might expect a 5.5% return after 5 years with 10 basis points or 0.01% for every year invested in it (0.01%x5 years).

In real estate, it is difficult to assess what you are really investing in. I have found a way to begin simplifying the equation by evaluating rent premiums and their impact on the project. You want to make sure your investment opportunity has an appropriate capitalization rate, which can be difficult considering that these numbers change constantly. Avoid risk by performing due diligence on your business plan and use conservative guesses while evaluating investments.

When considering a property as an investment, people should consider the need to maintain payments.

Political upheaval and global pandemics can cause uncertainty for property markets.


Real Estate Heaven REH How to Deal with Real Estate Uncertainty StartledThe government shut down the property market last May, and buyers, sellers, and estate agents were plunged into a position we could never have imagined could happen.

The house-buying spike happened because the moment of uncertainty led to investors needing to scoop up cheap houses.

Large investors in properties are choosing to maximize their holdings now, instead of taking a risk and investing in new property.

The best way to start is with a business plan for property. This outlines the steps for investors so they know what option will add the most value.

Planning is how architects identify solutions to new spaces and include factors such as location, zoning, and planning precedents. Finding a suitable solution to pandemic climate includes converting commercial properties into residential ones or creating outside space.


With COVID, companies have been able to work smarter. Now, what should the Covid building be used for?

Square feet is a limited commodity in central London, so building upward, outward, sideways, or downward will increase their value. Some extensions are easier than others and some come with more risk and cost.

To ensure you are not breaking any laws, it is important to find out the city’s ordinances and regulations before investing.


Listed status:

Is it worth investing in a listed property? They fear that renovations on the property might have restrictions, affecting the end value.

Grade II listings allow some changes to be made, but they can still offer good opportunities for renovation. These listings are attractive to buyers who value their historical character.


Creating value through design

Going for planning consent first and then selling is cheaper and quicker than other routes. Obtaining planning consent at a property will immediately boost the value of it in the eyes of buyers and investors by eliminating their concerns about acquiring a property without the necessary knowledge.

To maximize your property profitability, you can look at:


Multi-functional space:

Family time has become a key component of contemporary life. As homes have long since taken on new functions, our home time and the experience of such within said environment have become a necessary part, or an extension thereof.


Improving space and function:

At the start of a project, the key elements should be reviewed. For higher-end properties, there are some fundamentals that are expected.

Having a master ensuite that has natural and logical circulation is important. The most successful arrangements include a space for sharing, with dressing rooms and bathrooms.



It is hard to find square feet in central London, so extending up, sideways, or down creates more space. Extending upwards can be simpler or more complex and at times can be risky and costly, but if it’s done correctly, there are also greater rewards.


Creating value through design:

If you decide to purchase a property before you can make the most of it, status matters. Having planning consent before you sell will allow for a bigger pool of potential buyers who want to buy your property. Many do not take the risk of purchasing a building without seeing proper paperwork.


Multi-functional space:

Our homes have taken on new purposes this year, as our offices, classrooms, fitness spaces, and entertainment zone. As a result, we’ve had to spend more time at home than before.

Open-plan spaces can make your home more conducive for working together. Removing barriers such as walls can amplify the sense of space and give a greater sense of natural light.


Improving space and function:

Real Estate Heaven REH How to Deal with Real Estate Uncertainty FearAlways review key elements of a project based on customer and client needs.

With every bedroom having its own ensuite, master ensuites and dressing rooms, the whole house will feel more natural. Ensuring that circulation throughout the open spaces is logical, you can feel inspired by the way the space flows.

The basement can be accessed while the house is in use and people will still feel uninterrupted.

You want your space to flow seamlessly from one area to the next and maintain privacy without sacrificing the sense of grandeur.


Emotional value:

It’s not just how much the home is worth but what feeling it gives you and how it incorporates space, volume, and light. We want to make the home feel luxurious for our buyers and we need to understand how those three important factors come into play in order to do that.

In high-end homes, all aspects of the design are important. Whether it be architecture, landscaping, interior design or function; Rive Gauche considers every detail to create a design that speaks in architectural language, materiality, and detail.



We want to show our clients that it is possible to deliver exceptional interiors with a responsible approach. This means building the highest quality properties that have a positive impact on the environment. When designing a new project, you are designing for 10-20 years, so it is important to think long-term by using durable materials from responsibly sourced suppliers and producers. Long-term we need to build futureproofing into the property by anticipating upcoming legislation as far as possible. Otherwise, a simple factor such as the property’s energy rating could make it unrentable.


Getting the best team in place:

Real Estate Heaven REH How to Deal with Real Estate Uncertainty Home IssuesThere are a variety of factors that contribute to the success of any project. Design and planning, for instance, play a critical role in the process from start to finish.

Local market experience is necessary for creating accurate information for your readers, especially if you live in a place like London with micro-markets and trends.

While the current climate is uncertain, opportunities abound with the right information and expertise. With knowledgeable investment advice and planning for potential risks, you will be in a prime position to make the most of any situation.

According to a leading expert in the field, understanding the changing faces of cities and how they are affected by COVID-19 is crucial to real estate.

In order to be successful in urban economics, it is necessary to have the deep knowledge of shifting demand and changing use.


As the market is uncertain, it is hard to predict how long the impact of the pandemic will last. Thus, transaction volumes are down and many asset owners in the commercial sector face reduced operating income due to higher vacancies.

Understanding how market prices and cash flows are affected by supply-demand changes is important to economics and “power dynamics.”

A shift away from big cities?

Real Estate Heaven REH How to Deal with Real Estate Uncertainty DoubtsThe London School of Economics makes it easy to work on, learn, and master all parts of finance. You will be able to work closely with research and teachers in real estate economics and economy theory.

Telecommuting: It is predicted that people from larger cities will move to smaller or rural areas as the population moves.

Professor Ahlfeldt thinks it is possible, but not inevitable. New York, Paris, and London are considered to be super metropolitan cities. They are in high-income areas worldwide and use globally connected internet. If the pandemic lasts long enough and makes a city less dense, more people could leave those cities.

The evidence points in two different directions: telecommuting may lower the economic advantages of being in a superstar city, and it might also be that access to more diverse, local goods make cities more attractive.


By 2040, many people will be working out in the suburbs, and living closer to their places of employment. This is because local goods can’t easily be purchased online.

Successful centers will offer a diverse environment for social interaction, which can’t be replicated by the internet. Many consumers find that ‘experience’ is a distinctive feature of consumption and it’s important to have such features in your city center.

The challenge of managing retail centers as they become part of the city, is a large one, but offers opportunities.


Online Shopping vs the High Street

Real Estate Heaven REH How to Deal with Real Estate Uncertainty Deep ThoughtsProf. Ahlfeldt predicts that the retail sector will need to adapt and be reshaped in order to meet new consumer demand.

The transition to online shopping gained momentum before the pandemic, but the crisis served as a catalyst that further accelerated this trend. Many retailers will have to reinvent themselves to remain attractive.

Prof Ahlfeldt argues that many basic consumer needs, such as grocery shopping, can be satisfied online.

Traditional shopping is at a disadvantage because of the affordability and convenience of online shopping. It will be able to survive if it is able to change its identity as an attraction for shoppers.


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