Lee Kiser is a multi-family expert, active real estate agent and director of Kiser group, Chicagoland’s leading mid-market multi-family real estate agency.
Multifamily industry participants know that we are currently experiencing a tidal wave of activity. Why does this happen, how long does it take and what should you do to take advantage of it? Let’s look at the underlying cause first.
Origin of the tidal wave
The multifamily market was artificially and externally constrained last year. What I mean by that is that the slow pace last year was not due to internal or regularly occurring cyclical market forces such as GDP growth, job creation, rent increase or decrease, interest rates, etc. All the market forces that led to occupancy and debt collection issues were external, artificial and temporary. At the 30,000 feet level, these were related to the pandemic and political/civil instability. I’ve previously described how these issues (and especially lenders’ responses to them) impacted the multifamily market.
Resolution – or the market’s perception of resolution – of these issues has caused capital from investors and lenders to flow back into the market after a 15-month hiatus. Couple this with the return of tenants, a shortage of available rental units in many markets and the inevitable supply/demand issues that cause rental growth, and there you have it: a tidal wave of capital, investors and deals being done at record speed.
Surfing advice for investors
The first thing investors need to do to take advantage of the tidal wave is to become liquid. This can be done in a number of ways – selling, refinancing, raising funds, etc – but the most important thing is to have the liquidity needed to be competitive during a very active period. I described the tidal wave and the perfect storm to harness your equity (sorry about all the weather metaphors, but they fit the bill so well).
After tapping into your equity for liquidity, the next thing to do is build your team. To win deals in a highly competitive market, everyone you need has to wait for your call when you find the right deal: broker, lender, due diligence staff, dealers to assist with inspections, lawyer and whoever else you want record. You don’t want to take the time to do this when you find the right deal; instead, you want to take the opportunity for everyone, get the feedback, and make your offer without wasting time or energy. Now put them in place.
The last thing to do is figure out how to differentiate yourself from other investors. Prepare yourself that prices will be high – that’s a given. Instead of trying to beat your competition by bidding more and more money for a deal, you can win based on your terms. If you have pre-assembled the staff you need, offer very short, fast and efficient terms for going through contingency and closure. Also consider testimonials from people with whom you have transacted in the past. Another idea is to make a short curriculum vitae or resume about you, your company, properties, etc., and a short story about why the property in question meets certain goals and objectives that you have. All of the above will add to your credibility in the eyes of the seller and should help you set yourself apart from your competition.
Surf advice for sellers
I only have two pieces of advice for sellers:
1. If your business plan for the next two to three years includes selling a home, don’t wait. Sell it now. The backlog of capital currently entering the market is already being cleared, but there is currently more water than the soil can absorb. This won’t last. I expect the pent-up capital overflow to be in place by the end of the year, so the third quarter of 2021 is the right time to sell and still get the wave.
2. Hire a professional broker with a tidal wave channeling strategy. A strategic and focused marketing plan will force the market to pay what it is willing to pay for your property, not what it is want Pay. Don’t leave money on the table.
The current tidal wave is creating extraordinary opportunities for investors, sellers, brokers and all other sellers in the multifamily industry. We need to close 2021 with record levels for rent, occupancy, collection, transactions, loans and all other relevant multi-family KPIs. Don’t look back on 2021 and don’t think “should, could, should”. Grab your surfboard, get in the water and catch the current tidal wave before it’s gone.
The information provided here is not investment, tax or financial advice. You should consult a licensed professional for advice on your specific situation.
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