Is The Crash Coming?

[Justin Goodin]

I don't want to keep beating a dead horse. I know this has been a hot topic for awhile. 

With Biden taking office, COVID, and multi family investing being at a 'peak' - what are you and your team predicting the next 12 months will be like for multifamily? Are you projecting rent growth? What are doing in your underwriting to give your investors confidence? 

I think cap rates will continue to compress, I think rent growth will still happen in select markets, and the Fed will keep rates low. We are still in buy mode and looking for opportunities. We are staying away from early 70's build and going after the somewhat newer vintage since the cap rates have a pretty small delta. I do think a correction of some sort is coming though. 

[Hans Suljic]

Hi @Justin Goodin

I've never been one to time the market. I've had many friends and fellow investors tell me that "the market is going to crash next year" for the past 5 years. I have family members who sold their homes in 2017 and 2018 and moved into rentals expecting a crash. 

This time it's a bit different. Covid has really brought up some uncertainty in the market and we have never experienced something like this in modern times. I don't think anyone has the right answers. Personally, I'm not going to sit around and wait. I'm going to continue to invest but in a cheaper market. As you said multifamilies are at an all-time high especially in my market so why not branch out. 

The way I see it is if I buy a triplex in Indiana for 80k and the market crashes and it's worth 35k it won't be the end of the world and I can just go back to my original market and capitalize on the cheap prices. 

If I buy a triplex here in Chicago for 800k and the market crashes and it's worth 500k I'm probably going to lose sleep over a hit like that and I won't have the money to invest while the prices are low.

If the market never crashes, then I just diversified my portfolio and gained some experience in another market.