Rental Property Investor · CT · Member since 2017 · 22 posts · 8 votes
As a young investor, I have been speculating that we should start seeing some price concessions in the multifamily space. For better or worse I have yet to see many opportunities that would be classified in this bucket. Frankly I am still seeing low deal volume in the 30-60 unit range.
I am curious to what you more seasoned and experienced apartment investors are seeing? Speculation on what we should see over the next 6 months is encouraged on this thread!
Real Estate Broker · Minneapolis, MN · Member since 2015 · 116 posts · 67 votes
6y
@Joe Potenza
In Minneapolis starting to see deals in multifamily. Particularly in the areas that do have C class AND in the areas that had riot damage - even has spread further into what would have been considered B area - Uptown. The landlords are reporting trouble not so much in being paid rent but with renting units. The amount of rent in those areas is falling. Crime is rising.
Now....that is when there will be good deals but you need enough cash to hold through the rough time ahead. The values will come back as this is area's around our lakes in the city...that geographic plus remains. In the long run the area will be rebuilt. Be ready to hold.
I believe there will be even better deals as others said when the stimulus shakes down and the moratorium subsides on evictions. Get your cash together now. I speak about Mpls trends on my you tube in Covid times.
One more thing about C properties. If you can have Section 8, then the rent is guaranteed. Not a bad thing while you wait it out. I built a multi million portfolio in C properties with Section 8 rentals. In fact, bought condemned buildings and brought them back to life. Sold when the price got high and traded up into larger multifamily.
You just need a system to handle that class of properties to hold people accountable.
Rental Property Investor · Columbus, GA · Member since 2016 · 623 posts · 337 votes
6y
Joe, I'll be curious to see what others are saying, but right now, things are smoking hot in ATL. As for SFH, the supply has dwindled down and we are seeing strong demand. I expect this will slow in both SFH and MFH but not yet. I'm curious to see what happens when the stimulus checks run out and the results of an election that will undoubtedly be contentious regardless of the outcome.
Investor · Alpharetta, GA · Member since 2019 · 78 posts · 74 votes
6y
Deal flow in my inbox for multifamily deals (100+ unit) has picked up in the past few weeks. From what I have seen so far, it's not so much of a COVID discount as it is a Fed Discount. A 4.7% cap property isn't a smoking deal with a 4.5% interest rate. However, a 4.7% cap rate property with 2.8% agency debt frees up a lot of cash flow even if collections head in the wrong direction (always want to verify DSCR, break-even, and default ratio though).
We'll see what happens when the unemployment benefits and stimulus expire, but Class A/B seem to be holding up on collections. Class C has reportedly had some issues as that demographic has been hit harder by small business closures. You can verify collections here:
The real concessions in this market seem to be in Office/Retail while Multifamily/Self Storage/Industrial seem to be holding up well.
You should listen to Michael Becker and Paul Peebles on the Old Capital Real Estate Investing Podcast. They give you realtime info every Monday on what they're seeing and what they're expecting.
Rental Property Investor · CT · Member since 2017 · 22 posts · 8 votes
6y
@Bryan Mitchell Very helpful insight, I personally think as the government stimulus run out, Multifamily apartments will see increased pressure with tenants struggling to pay rent.
Rental Property Investor · CT · Member since 2017 · 22 posts · 8 votes
6y
@Jordan Burnett Thank you very much for the post. That is some great information. The space I am looking to buy in is the Class C and lower Class B. Do you predict the collections in class C to continue decreasing due to the removal of COVID related stimulus (the additional $600 a week, that ended 7/31)?
Just a couple of weeks ago stumbled upon the old capital podcast and have been working through the content, so thank you!
@Jordan Burnett Thank you very much for the post. That is some great information. The space I am looking to buy in is the Class C and lower Class B. Do you predict the collections in class C to continue decreasing due to the removal of COVID related stimulus (the additional $600 a week, that ended 7/31)?
Just a couple of weeks ago stumbled upon the old capital podcast and have been working through the content, so thank you!
I have no crystal ball, but if things continue like they are, then yes.
Eventually, you may have some class migration (Class A Tenant->Class B Apartment and Class B Tenant ->Class C Apartment). However, evictions are currently limited many places, which may remove the normal vacancy pattern and thus keep pretty much everyone in place.
Rental Property Investor · CT · Member since 2017 · 22 posts · 8 votes
6y
@Jordan Burnett Agreed, it seems like with the stimulus ending and foreclosure restrictions in some states being lifted the normal vacancy pattern we might see in a recession environment could start occurring in the next couple of months.
Developer · Atlanta, GA · Member since 2018 · 21 posts · 14 votes
6y
Of course, everything is speculation at this point. We've never been through such a pandemic where literally the entire planet shut down. As far as metro Atlanta deal flow, it's certainly slow. Hardly anything comes up on CoStar, Loopnet, etc. Most MF owners who need to sell, get a local MF broker on board and they market the deal to a handful of buyers without spending the time/money on putting together an offering memo. Yes, the current terms from agency financing certainly helps. I have not seen any on or off-market opportunities that are priced lower than pre-COVID. I forecast some opportunities on smaller MF deals where the following happens: mom/pop operation or residential type mgmt, non-agency financing debt that's maturing soon, sub-standard mgmt pre-COVID that's exacerbated today with collection challenges.
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
In Portland and deal volume is off like half from the peak in 2016.
However, prices are holding up. In 2009 I was telling people to buy (if they could get banks to co-operate), however, beside a few owners getting forced by a bank, prices were flat.
Then 2012-2017 they doubled.
I think with Portland proper govt getting more aggressive, people are going to want out, but it's not showing in prices yet, just inventory that is sitting there.
Investor · Beaumont, TX · Member since 2016 · 171 posts · 277 votes
6y
I'm doubtful that we will be seeing any heavily discounted deals. The low interest rates as others have said, as well as strong collections during COVID have owners still wanting top dollar. The most you can do is stay in front of brokers so when deal flow does pickup, you have a shot.
Don't expect to buy anything half off. I think at most it will be a slight dip in price if any, unless of course you find a mom and pop unorganized complex that are tired. If your target is that 30-60 range, I would just market to those smaller apartments directly as there are a higher proportion of mom and pop owners in that category.
Real Estate Broker · Minneapolis, MN · Member since 2015 · 116 posts · 67 votes
6y
@Joe Potenza
In Minneapolis starting to see deals in multifamily. Particularly in the areas that do have C class AND in the areas that had riot damage - even has spread further into what would have been considered B area - Uptown. The landlords are reporting trouble not so much in being paid rent but with renting units. The amount of rent in those areas is falling. Crime is rising.
Now....that is when there will be good deals but you need enough cash to hold through the rough time ahead. The values will come back as this is area's around our lakes in the city...that geographic plus remains. In the long run the area will be rebuilt. Be ready to hold.
I believe there will be even better deals as others said when the stimulus shakes down and the moratorium subsides on evictions. Get your cash together now. I speak about Mpls trends on my you tube in Covid times.
One more thing about C properties. If you can have Section 8, then the rent is guaranteed. Not a bad thing while you wait it out. I built a multi million portfolio in C properties with Section 8 rentals. In fact, bought condemned buildings and brought them back to life. Sold when the price got high and traded up into larger multifamily.
You just need a system to handle that class of properties to hold people accountable.
Rental Property Investor · CT · Member since 2017 · 22 posts · 8 votes
6y
Originally posted by @Dan Biber: Super helpful. It seems even the brokers I have been working with, have limited deal flow on those off market opportunities. Thanks for a great response!
Of course, everything is speculation at this point. We've never been through such a pandemic where literally the entire planet shut down. As far as metro Atlanta deal flow, it's certainly slow. Hardly anything comes up on CoStar, Loopnet, etc. Most MF owners who need to sell, get a local MF broker on board and they market the deal to a handful of buyers without spending the time/money on putting together an offering memo. Yes, the current terms from agency financing certainly helps. I have not seen any on or off-market opportunities that are priced lower than pre-COVID. I forecast some opportunities on smaller MF deals where the following happens: mom/pop operation or residential type mgmt, non-agency financing debt that's maturing soon, sub-standard mgmt pre-COVID that's exacerbated today with collection challenges.
Rental Property Investor · CT · Member since 2017 · 22 posts · 8 votes
6y
Originally posted by @LeAnn Riley: LeAnn thank you for an awesome response. I will certainly check out your real estate channel on youtube!
@Joe Potenza
In Minneapolis starting to see deals in multifamily. Particularly in the areas that do have C class AND in the areas that had riot damage - even has spread further into what would have been considered B area - Uptown. The landlords are reporting trouble not so much in being paid rent but with renting units. The amount of rent in those areas is falling. Crime is rising.
Now....that is when there will be good deals but you need enough cash to hold through the rough time ahead. The values will come back as this is area's around our lakes in the city...that geographic plus remains. In the long run the area will be rebuilt. Be ready to hold.
I believe there will be even better deals as others said when the stimulus shakes down and the moratorium subsides on evictions. Get your cash together now. I speak about Mpls trends on my you tube in Covid times.
One more thing about C properties. If you can have Section 8, then the rent is guaranteed. Not a bad thing while you wait it out. I built a multi million portfolio in C properties with Section 8 rentals. In fact, bought condemned buildings and brought them back to life. Sold when the price got high and traded up into larger multifamily.
You just need a system to handle that class of properties to hold people accountable.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
6y
If we see a major shift, I would expect to see it in mid to late 2021. First government stimulus is holding everything together for the short term. As this goes longer, that glue will weaken and cracks will form. If the economy is doing bad at that time, tenants won't be able to pay rent and owners will begin to feel the pressure, eventually giving up. This is no an overnight process.
Multifamily is a slow moving ship. It's going to take awhile for it to turn.
We've seen a substantial uptick in deal flow (50-150 units) in the past month, though there is still a pervasive seller-expectation of pre-COVID pricing, whereas our underwriting has shifted even more conservative.
As long as there are buyers willing to pay the premium (often justifying it with talk of how cheap debt is), prices will stay high.
Significant price reductions likely won't occur for another 12-18 months (late 2021). Here's a great video from Ken McElroy talking through the market cycle dynamics.
At the end of the day, we're all staring into a cracked crystal ball. Be careful you aren't just seeing what you want to see.
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
In OR and Portland-METRO, just some items:
1) 2009-2010 we were pushing 10% vacancy no price drops, just flat average
2) 2009-2010, very few transactions and the ones that got their hand forced by the banks did sell for < market value
3) Gross dollar volume in 2020 will be << half of 2016 (the peak year in Portland).
4) I still see some price increases, but not at the rate of 2011-2016.
5) Vacancies rates are still <5% and any other type of CRE would kill for that
6) Rates are getting close to 3% for normal deals
Summary - I'm not seeing a collapse in pricing, but probably flat for the next couple of years here. Also, fewer transactions since it'll take a while for owners to feel the pain enough to sell.