MY WEEK AS A REAL ESTATE INVESTOR (3-27-23)

As the real estate market continues to shift, investors are finding it increasingly difficult to make deals pencil out. Recently, I submitted an offer on a 120 unit apartment deal in Brownsburg, IN, and a 58 unit apartment deal in Harrisonville, MO. While the deals seemed promising, it was interesting to note the challenges that came with them.

The 120 unit apartment deal had an asking price of $16 million, and many offers came in at $13 million, highlighting the significant disconnect between buyers and sellers. Our offer for the 58 unit deal is penciling out at about half of the seller’s asking price.It seems that buyers want tomorrow's price while sellers want yesterday's price. The looming fear of an upcoming recession has caused the market to shift from a seller's market to a buyer's market, which has further complicated matters.

In the past two years, most deals were done with a 3-year short-term bridge loan with a variable rate. However, most of these loans are coming due starting in the end of 2023 and throughout 2024. Many believe that bridge loan lenders will not honor extension options because they want their capital back so they can loan it back out to the market at a higher interest rate. This combination of increasing interest rates and bridge loans maturing will cause "price discovery" in the commercial real estate market.

Multifamily experts believe that we are 6-12 months away from deals getting done again, making it crucial for our team to maintain relationships with owners, brokers, capital partners, and to continue looking for and submitting offers on deals. Despite the challenges, it is still possible to find deals that make sense. However, it requires persistence, a willingness to adapt to the changing market, and a solid understanding of the trends that are driving the industry. I simply refuse to use this as a convenient excuse for not hitting my acquisition goal this year.

In conclusion, the current real estate market presents both challenges and opportunities for investors. While it may be harder to make deals pencil out, there are still deals to be found, and it is important to remain proactive and nimble to capitalize on the opportunities that arise.