Is this a good time to invest in multifamily real estate?

With strong fundamentals, many new construction starts and a sizeable amount of capital on the sidelines, many industry analysts think now is the right time to invest in multifamily properties.

Multifamily real estate stands out in today’s investment landscape, offering robust returns with somewhat minimized risk. It's also a great way for first-time real estate investors to ease into the rental property market. Vacancy rates are low, rent growth continues to be very strong, and we are still dealing with a housing shortage in this country.

An important factor is that there is an enormous amount of capital on the sidelines right now, and this capital is waiting for the right time to jump back into the marketplace. As that capital starts coming into the market, it’s actually going to be more difficult for people to get deals done just because of the amount of competition that is going to be going after every single deal.

According to John Sebree, Senior Vice President and National Director, Multi Housing Division, at Marcus & Millichap, for those investors who are ready to enter, he said they must first determine what their cap rate is going to be. “Maybe it’s a five and a half, maybe it’s a six,” Sebree said. “But it’s probably not gonna be a seven in today’s market. You have to understand exactly where interest rates are, agency debt, or bank debt, and you’ve got to keep in mind that you may have to underwrite negative leverage for a short period of time.”

Once an investor’s parameters are set, and once an investment strategy is in place, “You’re going to have to be very aggressive on any property that comes within that zone,” Sebree said.

Property Management is also playing a more crucial role than ever in this current environment of higher expenses. Making sure that you have an efficient property management operation is going to be critical to maximizing values.



PRG Commercial Property Advisors is a market leader in multifamily transactions. Contact me today and let me help you with your investment goals.

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