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Transcript:
Chris Bounds 00:00
Market Outlook. I’m sure your crystal ball is broken. Mine’s been broken for a while. But we’ve Feds fighting inflation. And they’ve been very adamant on doing everything they can to get inflation down to like 2%. At least from my observation, it seemed like maybe they thought they were on the right track, and then boom numbers pick back up again. Which at least on the single family side, and we’ve seen mortgages, pick it back up. I mean, it’s not Harmsen correlative. But it there is some relation. So where are you seeing the multifamily market over the next 18 to 24 months as far as well, let’s not let’s not go that far out. Maybe 1218 months, as far as valuations and buyer sentiment, this whole bridge gap between salary expectations and minor expectations?
Darin Batchelder 00:58
And what do you think? So I talked to a lot of syndicators, a lot of syndicators seem to think that in the next six to nine months, there’s going to be a lot of deals that are going to be coming to market that are in trouble. Because bridge loans were provided on these deals, and there were two or three year bridge loans and they’re going to be coming due and with interest rates going up, they’re not gonna be able to refinance. And so they’re gonna have to sell at a discount. That very well could happen. I don’t, I’m, I’m not really sitting there, you know, thinking that that’s hanging my hat, if that’s going to happen. And look, all investments are cyclical, I’ve seen real estate go down, and when it goes down, it typically stays down for, you know, one to three years. But what I’ve seen since being involved in this market, is that I’m a believer, like longer term, medium to longer term, that multifamily is just a fantastic asset class.
So that’s why I want to have a loan on the deal that’s at least five years out, so they can, if it goes down, you can ride through that down period and come out the other side. But I’m a big believer that multifamily asset values will continue to rise, we may have a dip that comes. But so I’m still bullish on it. You know, there’s a huge affordability gap right now. What does that mean? It’s the it’s the gap between okay, if you were to buy a house and put 20% down and and, you know, get a 7% mortgage, what would your payment be? versus, you know, what would it cost to rent it and, you know, it’s at all time highs right now that that difference? So I think that you’re going to have, you know, more people that are going to choose to run because they don’t even have they don’t have the cash down or it’s too costly to buy. And then if we go into a recession, what happens during recessions? Well, people lose their jobs, they can’t afford the mortgage, they sell the house, and then they have to go and rent. You know, so I’m a believer that, you know, the fundamentals support, multifamily going forward. But I’m also a realist that there could be, you know, a downturn.
Chris Bounds 03:31
Yeah, that’s kind of been my sentiment is the the long term outlook seems very favorable, just with supply and demand and just basic fundamentals with housing affordability, but the short term. I mean, that’s really the challenge is, is
Darin Batchelder 03:49
yeah, that’s, that’s the challenge. And, you know, what, I’ve seen people getting deals done today, or, you know, a lot of people are doing deals with, you know, assuming loans on other deals. And what I would tell listeners is, you know, it’s probably a great time for first time, investors, because there’s not as much competition, there’s a lot of people that have pulled back, and they’re like, Hey, I don’t, you know, I’m gonna wait until the dust settles, well, when the dust settles, everybody piles back in, and then you as the first time investor are going to be at the back of the line, and the brokers not going to pick you. But right now they’re spending time with with a lot more buying groups, because there’s, you know, a lot of people have backed off. Yeah,
Chris Bounds 04:35
I would imagine that’d be especially true with small multifamily with Mom and Pop owners too, especially toxic.
Darin Batchelder 04:42
Absolutely. Um, and, you know, I’m not in that creative finance world. But, you know, in the small multifamily I mean, it may be an opportunity to, to get sellers to do seller financing, you know, and so you have to put less money down and You get into the deal you solve their problem they want to get out and they they can’t because of the finance markets and and you give them the price but you know they they do seller financing