@Alvin Sylvain
Sellers we usually deal with have occupied and stable property, not under distress. We also target high yielding properties in markets that don't crash hard. Most of ours were less motivated to sell at the time of the original post because so much was in flux and they were hesitant to give up their rental income for a relatively small check, since the properties we target are worth about 50k/unit at market value in most cases.
We have noticed that now, as things have started to "normalize" our sellers are back to their normal level of interest in selling, because they own quality high yield properties that are pretty insensitive to market volatility. It's the reason we target this product- for robustness in recessionary environments... and our sellers' stoic behavior is validation if anything.
What we are finding though, is that the mismanaged, distressed properties we have come across are being sold a bit more desperately. Two big reasons we're seeing here- their owners are likely the type to have poorly managed personal finances as well, or their properties performance has worsened in the light of eviction moratoriums/job loss/ethical ambiguity of poorly selected tenants. We're not getting these deals any cheaper than we ever did, we're just coming across them more often and certainly adding to our holdings when we do.
Eviction moratoriums have expired and courts have reopened in most places we operate. I don't think they'll last forever, they weren't created due to covid job losses, they were created to buy tenants time while governments figure out their stimulus plans and disburse funds. Courts are a bit backed up now, but they'll normalize too.
The biggest impact we're seeing on value is the bottleneck in the buyer pool being created by bank tightening. Liquidity requirements are through the roof, buyer and property income are being discounted heavily at the underwriting table, and property documentation is heavily scrutinized to ensure that the banks are reducing risk in their portfolios. I used to get a buyer with 40k in the bank qualified to spend 25k of it on a downpayment towards a property... now that same 25k downpayment has to come from a buyer with 100k in the bank and very little debt. Properties at 10 caps aren't meeting cash flow requirements and buyers are asked to put more money down as a result. These big banks have a lot of commercial property in their portfolios, and A class multifamily. These assets will get CRUSHED, and the banks holding these notes have to make up the losses across other performing asset classes in their portfolios like affordable housing.
When commercial tenants recover, we will see banks loosen up. We'll have some brief euphoria, until the monetary easing is relaxed. If they do it gradually, it'll be a longer but less steep correction that we can all live with a bit more easily.
