Greg Cooper J.D.
July 21, 2023
The commercial real estate market has been on a tear in recent years, with prices reaching record highs. However, over the last 15 months, the market shift has been dramatic with transaction volume down as much as 74% by some accounts. We’ve certainly felt the slowdown in our brokerage business and with our clients. But as we all know real estate is a cyclical business and some experts believe that we are headed for a market bottom in the next 6-24 months.
This could be a great opportunity for investors who are looking to buy multifamily assets. Multifamily properties are arguably the most stable real estate investment, and they provide a steady stream of income. Additionally, the demand for multifamily housing is expected to continue to grow in the coming years, as more and more people choose to rent instead of buy and we continue to be undersupplied with housing.
There are a few reasons why the next 6-24 months could be one of the best times to buy multifamily assets:
• Prices are falling: The commercial real estate market has been overheated in recent years, and prices have reached record highs. However, the market has already fallen from 10-20%, and while prices are expected to continue to fall the rate of decline is slowing as the Fed rate hikes have slowed. This has provided investors with an opportunity to buy multifamily assets at a discount to the market highs.
• We are headed for a market bottom: The commercial real estate market is cyclical, and it is currently in the middle stages of a down leg. This means that we are likely headed for a market bottom in the next 6-24 months. This could be a great time to buy multifamily assets, as prices will likely be at their lowest point before prices begin an upward trajectory again.
• Demand for multifamily housing is growing: The demand for multifamily housing is expected to continue to grow in the coming years. This is due to a number of factors, including the aging population, the increasing number of single-person households, and the rising cost of homeownership. This growing demand could provide investors with a strong rental income stream from their multifamily assets.
Of course, there are also some risks associated with buying multifamily assets. These risks include:
• Lack of liquidity: Multifamily assets can be difficult to sell, which can make it difficult to exit the investment if necessary.
• Increased costs: Multifamily assets may require additional capital to renovate or improve as inflation has increased pricing across the board. This can increase the cost of the investment.
• Uncertainty: The future performance of the economy and the commercial real estate market is uncertain. This can make it difficult to predict how multifamily assets will perform in the short term, but the long term looks great for the asset class.
Despite the risks, buying multifamily assets can be a great opportunity for investors who are willing to take on some risk. The current market conditions, coupled with the expected growth in demand for multifamily housing, could make the next 6-24 months one of the best times to buy multifamily assets in a generation.
Here are some tips for investors who are considering buying multifamily assets:
• Get professional advice: It is also important to get professional advice from a qualified real estate advisor. They can help you assess the risks and opportunities associated with the investment and develop a strategy for success.
• Be patient: Multifamily assets can take time to turn around. It is important to be patient and not expect to see immediate results.
• Find a brokerage that has the technology, tools and national reach to help you find these opportunities.
• Start looking now, since distress is starting to emerge and the timing of a market bottom difficult to predict.
With careful planning and execution, buying multifamily assets can be a great way to build wealth and achieve your investment goals.