Buying commercial RE during current interests rates environment

[Alex Khodnev]

Hey everyone!

I'd like to bring a concern that I guess gets attention of many of you out here:

With the current market uncertanty, lenders are avoiding risks and tightening the terms(higher DCSR requirements, lower LTC's). The cost of money is
consistantly getting higher because of rising interest rates. CAP rates are not anymore equal to what they were a year ago, in addition to the impossibility that rents will grow the same insane amount of 10%+. Value-add costs rose up significantly compared to where they were even 2-3 years ago, because of inflation on material costs and labor shortage. Same time it seems the seller's didn't get it yet and acting like it's 2021 out there. What comes out, is that every deal we underwrite brings us FAR AWAY from seller's price expectations. My guess we are not alone in this situation.

Another observation is, that many deals being on market without getting under contract for significant amount of time(sometimes sellers trying to catch the train and adjust the pricing).  Many deals are falling through and getting back to market.

So how do you guys actually buy apartments(or any other commercial RE) using syndication model and leverage in current environment?
We are trying to figure out the right formula and the working method for still getting deals under contract and closed. 

Thank you everyone for your attention and responses.

[Charles Seaman]

@Alex Khodnev You're definitely not the only one experiencing this right now.  In my estimation, many deals are overpriced.  While there might be a few unicorns, be patient.  The uncertainty in the market will fade.  When that happens, the market will either see continued demand that leads to strong buying activity or prices will drop to reflect the new market conditions.  Either option will provide good buying opportunities.  Continue building relationships, continue looking at deals, and be ready to strike when the right opportunity presents itself.