Where are all of the deals?!
Steve Nabity
Want To Invest In Real Estate But Don't Know Where To Start?
“Where are the investment opportunities?!” This is what a friend and eager investor recently asked me. Fair question.
I proceeded to tell him that the deals are out there, but finding the right one is tougher now than it was even just a year ago (you know, because of high interest rates, the Fed, hubris sellers, etc). On top of that, for every hundred deals you analyze, maybe only one is worth buying. These two things, along with a few others, make finding a good investment opportunity a tough task.
All that said, we’re actively analyzing deals every day and firmly believe that the best opportunities are going to be unearthed towards the end of 2023 and into 2024.
| Property | SPC Offered | Sold For | Difference ($ / %) |
|---|---|---|---|
| Property #1 | $1,500,000 | $1,800,000 | $300,000 / 20% |
| Property #2 | $7,600,000 | $7,900,000 | $300,000 / 4% |
| Property #3 | $6,600,000 | $7,200,000 | $600,000 / 9% |
Want To Invest In Real Estate But Don't Know Where To Start?
In each of these cases, an outside buyer overvalued and overpaid for the property. We went back and underwrote each of these at the price it sold for and the numbers didn’t even remotely work. If the buyer has lots of cash and wants to liberally deploy it, so be it.
While making it to Best and Final only to not secure the property is painful, it’s infinitely less painful than buying the property at the wrong price! (Note: Best and Final is the last round of offers for the most competitive investors).
On that note, the multifamily investment community is a small one and so we get the inside scoop on what’s going on around the nation with other investors. We hear about the successes, the struggles, and sometimes the bonehead decisions.
With all the headwinds we’re seeing in multifamily investing (See “interest rates, the Fed, hubris sellers), some people have resorted to being more lenient on their underwriting standards to make the numbers work. Some might predict higher rent growths than they should, or a lower exit cap rate, etc. These tactics are fraught with potential issues for syndicators and their investors. We’ve already seen some of these tactics backfire in a few cases.
Be prudent. Stick to your conservative tenets. Wait for the right deal rather than forcing it.
Who knows, maybe in a few years we’ll get another crack at one of these three properties we lost out on…
