Multi-family prices will not come down significantly
We know that Commercial Real Estate Investments have some of the best advantages for returns when compared with Residential Real Estate. In this new post-COVID higher interest rate market, our strategies for buying apartments is changing. Here is what we see, and what we are doing.
If you think we are on the precipice of another 2008, keep waiting, I’ll keep buying. It makes for good rhetoric, but this is not going to happen.
Here is why;
- More demand than supply, this is still increasing in the areas we buy in.
- Rents are still going up-they will not fall. Look at the historical MF Rent charts for the last 50 years. Rents don’t do down. Ever.
- Increase in rents continue to drive NOI and values.
- Sellers have been “price anchored” by 2021. They think their properties are worth a lot, and they won’t take significantly less.
- Single Family housing is more expensive now. Rates are making housing MORE unaffordable. We are seeing, and will continue to see, a shift in the total economy. The American dream is dying. The house and white picket fence? Not anymore. Now its the 2 bedroom with a community pool in a pet-friendly complex.
Multifamily prices have come down a bit, this is true, but are a far cry from the bloodbath of 2008.
Our Strategy – Focus on debt, not the purchase price.
This is how you are going to get ahead in this cycle and be looking smart in the next 5-10 years.
Here are the tactics;
1) Lots of great debt was placed over the last 3 years. Take advantage of it. Assumption loans used to be the red-headed stepchild, now they are the prom queen. If you have to pay more to assume a loan of 3.63% with a 7-10 year fixed term, pay it. Run your underwriting taking into account your new debt will now be 5.5%-6.5%, and over 8% for bridge!
2) Get the seller involved. Sellers want a high price, so get them on the equity side of your deal. Offer them a piece of the new deal, or maybe a promissory note, or pref equity. Every dollar they finance to you is a dollar you don’t have to raise, a % of equity not given away, and bump in IRR for your investors.
3) Shy away from the heavy lifts. Cash is king, and they need lots of it. Big remodels don’t work with assumptions typically. Grab the operational play, bump those rents, pay down the loan, and ride the inflation wave.
4) Inflation is your friend, not the enemy. For every dollar your rent rises, your long term fixed debt becomes easier to pay off. In fact, the “powers that be” know this, and because inflation benefits the wealthy land and business owners, it will always just be a political talking point. Remember-they will never stop inflation. Grab as much good debt as you safely can, and manage your costs.
What This Means For You
We have created a system for you to invest directly into cash-flowing, hard assets that don’t require you to manage tenants or deal with any of the headaches that come from owning Single Family Homes. This gives you the freedom to use your time as you wish while we grow your wealth through these amazing assets!
If you are looking to secure your financial future, we would love to connect with you and explore partnership opportunities!
To Learn More about the many benefits of investing in Multifamily Apartments, Download our Free Passive Investor Guide today!
You can set up a complimentary discovery call to join our investor network with one of our team members here!