November 3 is looming on the horizon and the candidates are campaigning at a voracious pace. While the presidential election has rightfully taken center stage, there are many other ongoing campaigns for state and local offices, propositions and local ballot initiatives. Who and what to vote for are all coming at you via political ads on every kind of media.
Much has been said and written about how to vote, when to vote and whether the Postal Service can handle the surge in mail-in voting. With all the noise that is going on, it’s a wonder that anyone is paying any attention to anything else. However, for investors and others involved in real estate, particularly multifamily properties, the big question is how will the election impact their investments?
What Investors Are Doing
As you would expect, the uncertainty over which candidate will prevail has caused some investors to pause and wait until the outcome of the election is decided. They’re not investing, as they feel that there may be price declines on properties depending on which candidate wins. With the election only weeks away, I don’t think taking a short “time out” isn’t that problematic.
On the other hand, I’ve seen some investors continue to invest in properties. This is likely because, based on prior elections, there haven’t been any major shifts in multifamily prices one way or the other solely due to the outcome of the election — if anything, multifamily properties have been steadily going up in the past seven years. In addition, many seasoned investors understand that there are always some risks associated with investing and have weathered the uncertainty before.
While this is certainly a volatile time, many investors, myself included, do not base their investment decisions on potential election results. Long-term investment returns have never been guided by one candidate over another. The fact is, there is an abundance of other variables that affect the multifamily market. A more important approach is to monitor the market and stay on course with an individual investment strategy. Multifamily real estate is a long-term proposition, so for most seasoned investors, an election is only considered a temporary distraction.
Don’t Time Investments Based On Elections
As with other investment strategies that are ill-conceived, trying to time an investment to the election is a strategy to avoid. The reasons are varied, but candidates often shape their campaigns to boost negative messaging. This is done to put the opposition in a negative light, but it also tends to skew the overall impression of the country and the economy on the negative side.
I firmly believe that if you buy a property in a strong location and have a solid business plan to increase the cash flow, your investment will be solid regardless of who is in the White House.
Historically, when the economy is strong and employment is high, consumer confidence surges. That helps to drive up real estate prices, including multifamily properties. However, with the current pandemic, consumers are under a remarkable amount of stress. There is also an inordinate amount of uncertainty about when the economy will rebound and when the pandemic will come under control. This uncertainty might drive down consumer confidence again, so while it is unlikely to have a huge impact, there’s no way of knowing for certain how the election results might impact multifamily properties.
Despite the unknown reality of post-election day, many investors go back to basics and focus on the location; a solid asset in a good location will likely be a good investment regardless of who takes the presidency.
If mortgage rates remain at their historic lows, and the Feds indicated that will happen, while the economy will slowly rebound, I’d predict that the multifamily market will remain stable and ultimately become stronger. That means that the election won’t have much impact, if any, on multifamily properties. We’ll know soon enough, and when the pandemic is under control and consumer confidence returns, a more positive picture of multifamily properties will emerge.