It is starting to feel like 2006 Again in Part of the Market

[Michael Zuber]

I have to tell you part of the real estate market is starting to feel like 2006 all over again.  If you look back at the charts 2006 goes down as a pretty good year.  That is until you see 2007, 2008, etc.  So what am I seeing this time that freaks me out and scares me to my core?

I see a "Herd" of new real estate investors rushing into a part of the market just like 2006.  You see in 2006 everyone was buying Residential Properties as anyone could get a loan and shoot multiple loans as it was so easy.  This easy financing drove prices up 20-40% more than they should of been.  But hey when DEMAND sky rockets prices have to go up.

So what am I seeing today?  Well today the asset class getting extra attention is B Class Apartment Buildings with Value Add Opportunities.  You see over the last 5-8 Years so astute investors have made an absolute killing in this space. They are sharing their stories and the large returns are driving more interest.

This interest has been spiked with the notion that anyone could be a Syndicator or General Partner, all they need is to go raise money via their network and boom they have LP's.

This increase demand is occurring on a much smaller supply size and thus Prices have raised, cap rates have lowered and suddenly what was a C or D property is boom a B- Property with upside.

If I am right the Lenders won't lose much if history repeats itself instead the LP's will be forced to hold on a lot longer, take a discount to get some money back or lose it all if the GP's can't manage the property.

In the end for the first time in 15+ years I am not in the camp of bigger is better as I am getting better returns on Single Family Homes.  

I think 2019 will serve as a Top for Multi Family units much like 2006 was the last good year for SFH before the last crash