Is 100+ Unit Florida Multifamily Investing Dead?

Question

I interviewed a guest on my podcast recently who said he is no longer investing in large multifamily right now.  He's concerned that we are too far into a seller's market. And he said "I just don't know where this market will be in a few years."  Do you agree?  Why or why not?

Charles Seaman · Answer

@Mike Lorence I share your guest's concern that we're too far into a seller's market.  But I'd also say that historical rhetoric doesn't really apply in the current time because we really are in an unprecedented time.

In the last 14 months alone, we've literally created $6T out of thin air.  Interest rates are slightly higher than they were a few months ago, but are still very low in comparison to where they've been historically.  A lot of money has been invested in multifamily and there's no slowdown expected because of the amount of money available and the quality of people and groups that are investing in multifamily.

It's important to realize that many big groups (i.e. institutions, equity groups, etc.) shifted their investing focus from office and retail to multifamily during the pandemic.  This brought an influx of new buyers and new money to the space.  It's likely that many of these groups will continue investing in multifamily even after the pandemic ends.

So I think that buying is still wise, but I'd certainly recommend being cautious.

Todd Dexheimer · Answer

Great graph. This shows that from October, 2008 until September 2012 we had the lowest housing starts since they started tracking the data! 4 years! From 2012 through today, we have had a slow ramp up back to normal. What this doesn't account for is the amount of units that have been knocked down or the population growth and demand for new housing.

With record high material pricing and labor pricing, I would be surprised to see a big uptick in new construction.

Mike Cosmah · Answer

@Charles Seaman

I think there are some solid point raised here. The MF market is no doubt HOT and a lot of institutional and foreign money is raising demand and pricing along with it. I think any savy and reasonable investor would be concerned about buying too far into an up cycle. I think the devil is in the details; what market you’re in can make a major difference in all of the factors you mentioned. Many of those I know that have been in MF for a long time are still open to primary markets for the right deal but those are far and few in between. They always have been but it’s true more now than ever. They are focusing a lot of their time and capital in secondary and terciary markets that are showing promising growth and potential. It’s my opinion that this is the smartest move for many MF investors right now depending on their goals, available capital and strategy.

However, I will add that I still have A LOT of investors asking to find 100+ unit assets in FL. I definitely wouldn’t say it’s dead. It’s just extremely competitive.

Jeffrey Allen · Answer

I think no matter what the market is doing there is always a “right” price to buy at.  If the assert is acquired properly and has good debt that can help offset the imaginary 6T in money printing and stave off inflation for your cash.

Charles Seaman · Answer

@Jeffrey Allen You're 100% correct, but getting it at that right price is easier said than done.

@Mike Cosmah It's definitely not dead.  You're absolutely right about demand being at a fever pitch.  But the people buying are the bigger players (ex. institutions, equity groups, etc.) and the newer investors (i.e. people that weren't investing in 2010 and 2011 and 2012).  Many of the investors that were buying a decade ago are sitting on the sidelines now because they realize that the market is overbought.  I realize that too, but I also realize that the rules of the game have changed a bit and it looks like they're going to continue changing in the coming years, so many of these things work in favor of multifamily, albeit to the detriment of our currency and overall economy.

Evan Polaski · Answer

@Mike Lorence, is it dead?  No. Are we in a hot market?  Yes.  But it isn't limited to 100+ units.  It is basically every piece of residential real estate.  Listed my house this last weekend: 18 showings 5 offers, with all of them at least at asking price, and most over asking price.

Any remotely reasonable piece of real estate, from the $100k house to the $100+mm multifamily, I see or hear about is in multiple offers.  I don't see a correct coming.  I see continued high demand for quite some time.  We are still not anywhere near the historic peak in new supply on new housing starts: https://fred.stlouisfed.org/se...

Mike Lorence · Answer

@Charles Seaman - great perspective.  Thanks for your insight!

Charles Seaman · Answer

You're welcome @Mike Lorence

Is 100+ Unit Florida Multifamily Investing Dead?

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