Real Estate Broker · Denver, CO · Member since 2019 · 24 posts · 11 votes
Whats up investor friends? I had an interesting conversation with a longtime Denver investor who said 'I dont know why ANYONE would buy multi-family investment properties right now.' I know his reasons but am eager to hear more perspectives on both sides of the issue.
I think that buyer and seller expectations are too far apart. Many sellers are not willing to come down in price enough for deals to make sense for buyers at the moment. The continued high rates will force some to sell, especially in the smaller multifamily properties and there will be more opportunities. With that said, if a deal makes sense and provides the return you are looking for, I see no reason not to buy now.
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
3y
@Evan Rice It comes down to motivation. The "longtime Denver investor" is growing (buying), happy with his returns (coasting), or slowing (selling). Curious to know his age and motivation behind that statement.
I'm 36 y/o and got a late start with REI. We're buying in our market. Once you know the neighborhoods, numbers, and economic trends the only thing that slows you down is deal flow.
Real Estate Broker · Denver, CO · Member since 2019 · 24 posts · 11 votes
3y
@Jaron Walling Agree. This particular investor (early 40's) has been at it for a little over a decade so has seen the good the bad and the ugly. thx for the reply. Side note, I'm from Evansville, IN and all my best friends still live in the north Indy area (Zionsville, Carmel, Fishers). I'm trying to get them on the RE Investment train! What are you buying out there?
Most of the 'good' deals we are seeing are in KC metro. We look for positive cash flow and path of development (for appreciation) when investing.
Miami, FL · Member since 2022 · 83 posts · 68 votes
3y
I've asked this same question to investor friends and a big theme I've heard from folks is competition. Right now there's less competition than there was a few years ago.
I am currently not buying but mostly because I had bought a lot in the previous 2 years so I'm not in the rebuilding liquid capital phase. Prior to 6 months ago, I had been aggressively buying the previous 18 months because I had anticipated inflation would rise (guess I was right) and I viewed real estate as a safer investing that would grow my net-worth with high inflation speeding up the process in conjunction with the low interest rates that were available then. I was still always very cautious and particular about which properties I did invest in.
As for now: I think we have seen the worst of inflation and I also think that interest rates will likely remain at where they are now for the foreseeable future (I'm personally hoping they go back down in the coming years but that's impossible to predict). Having said that, if I had cash to invest with right now, I would buy more multifamilies in the current market but I would not feel any rush to do so. If the right deal comes along that I think would be worth it, then I would jump on it but at the same time, I'd feel very comfortable walking away from a deal I wasn't completely happy with. I'm not too concerned about interest rates because if the deal cash flows, then it cash flows and I can always increase the cash flow in the future with a refinance if interest rates go back down. I think there they may still be a bit more of a pricing correction for real estate coming but there is also a strong possibility that real estate prices will resume rising in the near future due to continued supply shortages (although they are highly unlikely to resume rising again at the rate they had been throughout 2021). Even if the prices do correct further though, I wouldn't be concerned since rental prices have historically increased even during periods when property values decreased so as long as I don't intend on selling the property, the currently appraised value of a property I own doesn't affect me. Even though real estate dips, historically it has increased over the long-term so as long as I am willing to hold the property for at least 5 years, the probability of me needing to short sell a property is very low unless I really really really overpaid for the property. I think deals can be found in any market, just need to be selective and not rush into a deal. I'm a fan of the mantra: "time in the market is better than timing the market"
@Evan Rice I’m buying but am currently in a bit of a holding pattern as I’m working to reposition my latest purchase, (1 week ago), and get started on the work needed there and get the management in place to get it turned around.
Deals are coming online in my area but not all of them are good cash flowing deals. I’m also looking for something for a relative that I’ll be managing for them as their market has gotten too expensive with huge tax increases.
I think now’s as good a time as I’m still in a lot of markets to continue buying as long as your deals still make sense according to your strategy.
Investor · Kansas City, MO · Member since 2020 · 400 posts · 278 votes
3y
I think investors are always 'buying' but it just depends on how many deals they're buying and how intently they're looking.
I'm sure if your investor friend had a deal brought to them that fit their buy box and had the returns they're looking for...they'd buy it if they had the cash.
But, it's a matter of competing at certain prices. I think multifamily right now is seeing too low of cap rates, at least for our buying strategy.
So we're 'buying', but we're not making nearly as many offers as we have in the past.
I am currently not buying but mostly because I had bought a lot in the previous 2 years so I'm not in the rebuilding liquid capital phase. Prior to 6 months ago, I had been aggressively buying the previous 18 months because I had anticipated inflation would rise (guess I was right) and I viewed real estate as a safer investing that would grow my net-worth with high inflation speeding up the process in conjunction with the low interest rates that were available then. I was still always very cautious and particular about which properties I did invest in.
As for now: I think we have seen the worst of inflation and I also think that interest rates will likely remain at where they are now for the foreseeable future (I'm personally hoping they go back down in the coming years but that's impossible to predict). Having said that, if I had cash to invest with right now, I would buy more multifamilies in the current market but I would not feel any rush to do so. If the right deal comes along that I think would be worth it, then I would jump on it but at the same time, I'd feel very comfortable walking away from a deal I wasn't completely happy with. I'm not too concerned about interest rates because if the deal cash flows, then it cash flows and I can always increase the cash flow in the future with a refinance if interest rates go back down. I think there they may still be a bit more of a pricing correction for real estate coming but there is also a strong possibility that real estate prices will resume rising in the near future due to continued supply shortages (although they are highly unlikely to resume rising again at the rate they had been throughout 2021). Even if the prices do correct further though, I wouldn't be concerned since rental prices have historically increased even during periods when property values decreased so as long as I don't intend on selling the property, the currently appraised value of a property I own doesn't affect me. Even though real estate dips, historically it has increased over the long-term so as long as I am willing to hold the property for at least 5 years, the probability of me needing to short sell a property is very low unless I really really really overpaid for the property. I think deals can be found in any market, just need to be selective and not rush into a deal. I'm a fan of the mantra: "time in the market is better than timing the market"
I don't disagree with anything here. When you buy it right its never a bad time to buy. Maybe more conservative/picky with your criteria, as you alluded to, but I love your reasoning. Thank you, Konstantin.
@Evan Rice I’m buying but am currently in a bit of a holding pattern as I’m working to reposition my latest purchase, (1 week ago), and get started on the work needed there and get the management in place to get it turned around.
Deals are coming online in my area but not all of them are good cash flowing deals. I’m also looking for something for a relative that I’ll be managing for them as their market has gotten too expensive with huge tax increases.
I think now’s as good a time as I’m still in a lot of markets to continue buying as long as your deals still make sense according to your strategy.
I think investors are always 'buying' but it just depends on how many deals they're buying and how intently they're looking.
I'm sure if your investor friend had a deal brought to them that fit their buy box and had the returns they're looking for...they'd buy it if they had the cash.
But, it's a matter of competing at certain prices. I think multifamily right now is seeing too low of cap rates, at least for our buying strategy.
So we're 'buying', but we're not making nearly as many offers as we have in the past.
Justin! I feel ya. Not many savvy investors like yourself get excited about 5.5-6 caps in KC or other similar markets. And I don't blame them. From my perspective, in order to justify making an offer the numbers still need to work but I'd also LOVE for the deal to be in an area that is poised to POP with appreciation in the near future (like those 6plexes in KC 😁). Cheers man! Hopefully we can connect when I'm out there later this year. TBD on when that will be.
@Evan Rice It is always a good time to buy multifamily real estate
Questions - With an increasing interest rate environment and troubling situation for some of the US (and European) banks, is this impacting investing in real estate? Should I wait it out to see how it all unfolds? Remember, real estate apartment buildings will likely continue to be of demand and appreciate over time, as it's been the case for a few decades. So it is about the deal you are buying. How to choose a sold market when investing in out of state? First, we look on a macro level (cities to invest in) and then micro level (specific areas within that city). We are investing in landlord friendly markets with high rent to value ratio, positive population growth and opportunities. Within that, we select areas with low or no crime, which are close to jobs and to the downtown core. Not only are we extremely selective on the deals that we put offers on, but we're extremely conservative in our underwriting which includes stress testing our deals, and preparing for the worst case scenarios both with interest rates and vacancy rates. Multi-family investing can be complicated and requires an in-depth knowledge and expertise. So are we buying, yes, but you have to be selective in the market and then the deal itself.
Multifamily provides so many advantages that it is our preferred asset class to invest in.
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
3y
@Evan Rice I look to experts like Sam Zell who always said - always be buying. Look at cash flowing and growing markets. Look for off market deals and brokers who specialize in off market deals. I still believe you can find great deals on market with the right tools but off market are usually less than retail. If you want to chat further about cash flowing markets or the Kansas City market I have some good data to share.
Investor · Baltimore, MD · Member since 2023 · 38 posts · 10 votes
3y
Hey Evan! Interesting convo you had there. I'm all in for sharing some thoughts.
So basically, I think it depends on each investor's goals, market conditions, and risk tolerance.
If someone's buying now, it could be because they've found a great deal or the cash flow is just too good to pass up. Also, low interest rates are still a thing, right? Gotta take advantage of that.
On the other hand, some peeps might be holding off due to high property prices, low cap rates, or just waiting for a market correction. Totally get that, too.
Personally, I'm still on the lookout for deals, but I'm extra picky these days. I believe it's all about finding the right opportunity and making sure the numbers work.
What do you think, Evan? Are you buying or waiting? And why? Lmk!
Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 344 votes
3y
Not buying right now. Main reason is because we look like we are heading into a recession and by the looks of the data it could be a bad one. Specifically looking at real estate a lot of syndicators are in that extend and pretend mode. I would start looking into buying once the yield curve un-inverts and we see some of the issues play out.
Whats up investor friends? I had an interesting conversation with a longtime Denver investor who said 'I dont know why ANYONE would buy multi-family investment properties right now.' I know his reasons but am eager to hear more perspectives on both sides of the issue.
If you ARE buying now, why ?
If you ARE NOT buying now, why not?
To me, it’s never a bad time to buy reveal in one properties. People always need to rent and have a place to live. Sure apr is super high but that’s what refinancing is for 🤷🏽♀️
I think that buyer and seller expectations are too far apart. Many sellers are not willing to come down in price enough for deals to make sense for buyers at the moment. The continued high rates will force some to sell, especially in the smaller multifamily properties and there will be more opportunities. With that said, if a deal makes sense and provides the return you are looking for, I see no reason not to buy now.
Investor · PA · Member since 2023 · 24 posts · 19 votes
2y
I believe it depends on the investors goals. Some won't touch it if they're not hitting a certain ROI. While others just want to get in the came and hold for appreciation. Being in the black is always better than being in the red.