Multifamily crash coming? (possible buying opp?)

[Bill E.]

Everyone knows the big hedge funds and institutional players have invaded the large multifamily (100+ units) space and driven CAP rate to all time lows in search of any kind of return. It is not uncommon to hear of these properties trading at 4% CAP rates in high demand areas. To them that sounds like a pretty good return considering the risk free rate of return is currently below 1%. The hedge fund buying appears to have had a "trickle down" effect and bumped prices in smaller properties in secondary markets as well.

To the private investor these numbers just don't pencil.

If more attractive yields become available in different investements in the future will the hedge funds leave? If they all try to sell these properties will there be a crash? Could a great multifamily buying opportunity be on the horizon?

Curious for BP opinions...

[George Paiva]

I don't even bother with a property unless i can pull 12% cap. Those 4% caps I just laugh at the brokers. Wait till the hedge fund has to go snake a toilet or manage evictions LOL...