Bob & Ben React: Why Now Is the Time for Multifamily

The market today is much harder for people with a short-term strategy. So, I think regardless of where you are, I think having a mid and longer-term view is important. One of the things we're seeing, I'll just tell you one of the things I'm hearing from investors is that there's a view that if the market recovers as expected, then while those current spreads might not look attractive, it's a basis play and that a year from now, you're going to regret not buying at that price. Now, I'm not trying to say it's always true, but I think that is one consideration out there is that there's a lot of dry powder that still has multifamily. It's obviously slowed in terms of sales these last couple of years, but it wasn't like an office situation, people exiting the market. It was more just like kind of waited out. And so, that money is going to come back at some point. And so, the Sunbelt markets will always be attractive. I think the Midwest is going to be attractive. Investors are increasingly drawn to these lower regulatory risk states. And so, I think if you can find areas where even if it's not like a big population growth, that doesn't necessarily matter. Some of these markets, as you guys know, in the Midwest, you have some submarkets of Kansas City that have barely added any supply in the last few decades and may be near some good economic anchors. And so, those are the type of spots that I think can be attractive.

Yeah, it's really interesting. I mean, Jay focuses primarily on housing. His whole presentation was just excellent to really dive into the numbers that matter. And I think what he's getting at here and saying, okay, maybe Maybe I don't want to pay a 4 cap right now. And you know, I probably don't still, but the point is the expectation of where, you know, these properties stabilize a few years from now, because, you know, he pulled up a lot of data about supply and supply has fallen off a cliff. You know, rent growth has been subdued because of that extra excess supply, but as it gets absorbed, as the, as the demand for rentals continues to be strong, you're going to see strong rent growth come back over the next few years. And that is going to create much more margin stronger yields. And so what he's— the point he's making here is this is a window. This is a window of time to be a disciplined buyer, and you're likely not going to regret doing that, um, even if you seemingly have to overpay in today's numbers, because where today is at is likely at the bottom, um, from a, uh, you know, supply and demand perspective. And the next several years will likely be very favorable for multifamily owners.

And I like how he called out, you know, the Midwest and the Sunbelt markets. And I think the point here is that there's lots of opportunity. It is still selective, right? But there's lots of different ways to play the market. You can go where there's low, low, lower supply risk. You can go where there's, you know, lower regulatory risk. You can go where there's higher growth. And there's not one right answer that's going to make you money.