The Worst is Coming For Multifamily Investors

The Worst is Coming For Multifamily Investors - Here's Why

Рет қаралды 18,835

Күн бұрын

The Worst is Coming For Multifamily Investors - Here's Why // There have been a lot of headlines recently about multifamily investment firms being in serious trouble right now, and with the record low cap rates we saw over the past few years and the meteoric rise in interest rates we've experienced over the last 18 months, it's not hard to see why this is starting to pop up.
But the kind of distress that’s materializing is primarily the result of just one or two factors that these investors got wrong up-front, which is creating a pretty unique situation that could end up leading to some of the biggest buying opportunities we’ve seen since the Great Financial Crisis.
So to help you understand in more detail exactly what’s going on in the multifamily market right now, this video breaks down the fundamentals that we’re seeing in the apartment sector today, what’s actually causing the distress that’s materializing in this asset class right now, and the opportunities that might end up resulting from these changes in 2024 (and beyond).
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🕒 Timestamps 🕒
0:00 Introduction
1:10 The Fundamentals
3:27 Capital Markets Impacts
5:00 How This is Playing Out
10:46 How To Learn Multifamily Investment Analysis
#multifamilyrealestate #commercialrealestate
*Nothing in this video should be construed as tax, legal, accounting, valuation, or financial advice or recommendation. All information in this video is intended solely for educational purposes, and you are advised to consult with your own personal professional advisors regarding your personal investment decisions.
**AFFILIATE DISCLOSURE: Some of the links in this description are affiliate links, meaning, at no additional cost to you, we may earn a commission if you click through and make a purchase and/or create an account.
Research and articles referenced in this video:
www.cbre.com/insights/figures...
berkadia.com/multifamily-repo...
www.yardimatrix.com/publicati...
www.nmrk.com/insights/market-...
berkadia.com/multifamily-repo...
www.cbre.com/insights/reports...
www.zillow.com/home-values/10...
www.trepp.com/trepptalk/multi...

Пікірлер: 47

@BreakIntoCRE 11 ай бұрын

What do you see happening in the multifamily sector throughout the rest of 2023?

@JamesEng 11 ай бұрын

In Dallas, we are seeing deals starting to be purchased for less than the loan amount. Especially deals bought in late 2021 and early 2022 with floating rate bridge loans.

@Woodshadow 11 ай бұрын

10 months ago a property I was looking at was listed at $9M. I made an offer at $7.6M. They declined. Now it is listed at $7.5M but I can’t pay that due to the interest rates being 1.5% higher.

@BreakIntoCRE 11 ай бұрын

Exactly - thanks for adding this!

@RisingWolf8 11 ай бұрын

Underwriting and forecasting is key. Fundamentals win. Replacement cost with justified premiums should be a basis. IMHO

@thivyanaravindan2291 10 ай бұрын

Hi Justin, just wanted to let you know that you should definitely do more of these "market review" type videos. Definitely gives a unique educated perspective on these subjects which is exactly what people are looking for!

@todmann67 11 ай бұрын

I’m in a tertiary market in WA. Growth projections are strong and local developers with good investor networks are pushing ahead with multiple projects. As developers settle into the new rate environment, they will get more active and those of us on the sell side will adjust prices accordingly.

@jackrembe5999 11 ай бұрын

Where in WA?

@todmann67 11 ай бұрын

South Sound@@jackrembe5999

@CharlesJacques21 11 ай бұрын

Not all Multifamily Investors! My team has been using fixed rate financing to acquire assets so our exposure to the interest rate hikes is very minimal. Proof that it's always important to do your due diligence Know your risk / return profile and everything that can go wrong before investing!

@adrianotto8304 11 ай бұрын

Agreed with everything said here- another massive problem we are facing is the insurance market in Sunbelt states, especially in Florida. We have a 232-unit Multifamily asset, and we were paying $550/unit/year in insurance. The new buyer would have to pay between $1800-2500/unit per year. This is killing a huge amount of deals.

@michaelc0419 11 ай бұрын

Great analysis. Future looks tough for those groups that bought at the top of the market. Timing really is everything.

@ic3482 11 ай бұрын

Very informational video with examples. Thank you!

@BreakIntoCRE 11 ай бұрын

Glad you found it helpful!

@uriarefaely8315 11 ай бұрын

Great video, great delivery. As always. Buying Break into CRE course was one of the valuable things i've ever did. Appreciate you Justin.

@BreakIntoCRE 11 ай бұрын

Great to hear you found the course so helpful!

@richardrussell8050 11 ай бұрын

Rental is tough to make work period. No wonder the rental rates have climbed so quickly to keep track with the Fed. With rental escalation caps and tenant protection this is becoming less attractive. Units will ultimately get smaller with higher rates/sf to cover holding costs for developers.

@BreakIntoCRE 11 ай бұрын

Definitely hard to make development deals pencil right now, especially with interest rates being so high.

@davidbergeron9865 11 ай бұрын

We passed on so many deals with these low cap rates that other buyers planned to "grow into". Thank goodness. Now we can buy them at reasonable cap rates. Patience is a virtue.

@stevenw373 11 ай бұрын

Solid breakdown my guy 👍🏼

@rivernorthhomes 11 ай бұрын

I dont see a multi family crisis...The downfall of shopping centers and strip malls (duw to insane vacancy levels due to online shopping) have led investors to now focus on Multi Family and Industrial Warehouses (data storage, cold packing )

@frankokonkwo3662 11 ай бұрын

Great video!

@reidervin9714 11 ай бұрын

I really appreciate all of your videos, I find them informative and I enjoy when you zoom out to understand how little adjustments can impact the trajectory of your long term career.

@BreakIntoCRE 11 ай бұрын

Great to hear!

@timothybracken1728 11 ай бұрын

Would selling it before the rates went up help fix the insane debt service problem ? The problem is if you effectively increased the NOI, why didn't sellers sell ? Especially if they knew they didn't fix rates.

@BreakIntoCRE 11 ай бұрын

It could have, but rates went up so quickly in many cases that a lot of investors didn't have time to increase NOI to a point where they could hit their pro forma projections if they were to sell. Properties also often take 3-6 months just to prepare for the marketing process, so by the time many of these firms finally felt comfortable selling deals, the buyer pool (at the breakeven pricing they had planned to sell for) had dried up.

@timothybracken1728 11 ай бұрын

Makes sense, thanks for the insightful response! Love your videos. @@BreakIntoCRE

@23drcharles 11 ай бұрын

According to the new book, The Bubble That Broke The Bank, the real estate crash is going to be ongoing and will be on the same level as a hydrogen bomb going off in the apartment industry. The level of decline will shock and awe the inexperienced investors. Unless you are highly experienced in multi-family and creative financing you will be wiped out and will never recover. This is an ongoing disaster.

@beltworkprojects6760 11 ай бұрын

What about rents? How far will rents drop with all the new supply? I see companies in CA, offering free rent for 3 months on 1 year leases to get tenants, which I assume is to keep the higher rates and bypass rent control.

@Bilbo383 11 ай бұрын

I can agree, been saying this since 2022. Post covid, we lost several MF deals that we were super aggressive on. Those analysts must have had insane assumptions in their models to make things pencil.

@BreakIntoCRE 11 ай бұрын

Absolutely - hard to project out 10%+ annual rent growth indefinitely and hit pro forma projections.

@Bilbo383 11 ай бұрын

@@BreakIntoCRE true! Or the funniest thing I saw on several broker proformas was a terminal cap in the sub 5 range for class c/b assets at disposition.Oh how times change

@Maymona93 21 күн бұрын

Thank you

@CH-nr5vy 7 ай бұрын

Might have 2 projects going belly up. Sucks!!

@newyorkcity25 11 ай бұрын

hi justin! i've been following your channel for a while now and have just graduated, looking to get a position in asset management after having really enjoyed an internship in the field a couple of years ago. for the best chance of hire, which courses of yours would you recommend for someone to be as ready as possible to take on a junior asset management role? not only the framework for what asset management is, but also more in-depth modeling knowledge - i took your bootcamp course and really enjoyed it, but just want to make sure i have all the bases covered! 😊

@BreakIntoCRE 11 ай бұрын

Congrats on the recent graduation! Real Estate Asset Management 101 would be helpful for a general AM overview, and you may also want to look into The Real Estate Financial Modeling Interview Exam Guide and The Real Estate Equity Waterfall Modeling Master Class to prepare for interviews. Good luck with the job search!

@newyorkcity25 11 ай бұрын

@@BreakIntoCRE awesome, thanks so much for the reply! i really appreciate it 🤗🤞🏼

@froggey5689 11 ай бұрын

Are annual expenses up that much? Occupancy down 50 bps, but expenses up 29%. Insurance premium is definitely up that much and utilities have increased, but not sure that is justifiable increase in expenses from 2021? What am I missing here.

@Dglinski2 11 ай бұрын

Justin, are you part of the LongAngle community?

@MisterKelisi 11 ай бұрын

Can you explain how “capital calls coming” relate to this video? I guess I just don’t understand after seeing this video 😢😅 the distress will cause investors to call capital to cover shortfalls in NOI? It’s not clear to me

@JamesEng 11 ай бұрын

Most cannot refinance their bridge loan in to permanent agency loans since they size on in-place cash flow. Thus, owners need to pay down loan with investor money to refinance.

@MisterKelisi 11 ай бұрын

@@JamesEng thank you! *subscribed**

@asterisk911 10 ай бұрын

Wow, he's really smiling. Seems happy about this. The USA being what it is, this will probably end worst for the tenants.

@markcharmon5764 11 ай бұрын

Dude, you are cute as f***. But you reaaalllly have to work on your delivery. This sing-songy, golly-gee-willikers, undulating vocal thing you do, along with the perma-smile... it's hard to watch. Try delivering your excellent content in a normal speaking voice with a less eager-looking visage. It would be a lot more effective.

@JohnDoe-dv3ci 11 ай бұрын

That's pretty gay bro. Leave the man alone

@babybangstfu 11 ай бұрын

Why is it that those who contribute the least often seem to critic the most smh 🤦‍♀️