When is the next deal coming?
This is a question I get a lot from our investors, so I wanted to share our view on how the current economy is affecting real estate deal flow.
We all know that, right now, interest rates and rents are going up across the country, but whatโs the impact been on acquisitions? In terms of the deal flow specifically, thereโs been a slow down over the past few months since the Fed declared their intention of increasing rates.
Is multifamily still a very strong asset class to invest in? Absolutely. Is it a โbulletproofโ asset in a recession? There's no such thing. While you canโt say itโs โrecession proofโ, it is more โrecession resistantโ. We take a look at the impact the current economy is having on real estate deal flow in the multifamily space and how you can still be successful in this market.
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๐๐ฒ๐ ๐ง๐ฎ๐ธ๐ฒ๐ฎ๐๐ฎ๐๐:
โข Overall, there's been a slowdown of deals, but prices are generally stable and we are seeing more off-market deals.
โข Developing strong relationships and a strong brand are keys to keeping your deals active and filling your funnel.
โข Returns are not what they were before; that's partially because the loan to value is lower and you need more equity to close deals.
โข The main thing is to adjust expectations and understand that, while returns may not be as high as they were before, theyโll still be solid.
โข Operationally, itโs important to understand not only the strength of multifamily as an asset class but also the forces that impacting your yields. If itโs financing and pricing, you should know up front. If itโs increasing expenses because of inflation, then you should be able to make adjustments in your operations; itโs different from how things were six months ago.
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