Should you put the brakes on real estate investing until AFTER the predicted market crash? Or would sitting on your hands mean a missed opportunity?
I don’t think we should sit on the sidelines – in fact we’re still buying – but we need to be cautious.
In this video blog I discuss how multifamily performed during the last market downturn and explain why the demand for affordable housing is not going away.
I also explain what we’re doing to protect our investors in case we do get a market correction.
If you’re a passive investor concerned about making investments in multifamily real estate in today’s market, then watch the video below (or keep on reading).
Multifamily in a Recession
Sure, you can wait until after the next recession – but when will this be? Experts have predicted one for years. And the fact is, multifamily performed very well during the last recession.
While 4% of single family houses were lost to foreclosure during the last economic downturn, only 0.4% of multifamily properties met the same fate. In fact, rents stayed flat and occupancy held steady in most markets across the country.
Supply and Demand
Developers are focused on building luxury buildings because the cost of construction is so high, so the supply of class B and C apartments is NOT growing.
Another reason we like Class B and C buildings is that in a recession, Class A tenants and homeowners flee to Class B apartments; in a good market, Class C tenants upgrade to Class B.
The demand for affordable rental housing is not going away, no matter what the economy does.
Riding Out a Correction
When we buy a building, we buy for cash flow and look for long-term debt from day one. Even though our business plan calls for a sale or refinance after 5 years, if there’s a recession we have the option of just riding it out.
Though it’s not ideal for your money to be tied up in an apartment building longer than expected, the silver lining is that you will continue to cash cashflow distribution checks while you wait!
The best way to lose money is to try and time the market.
There is just no way to predict market cycles, and if your plan is to make a fortune buying low and selling high… Well, good luck.
A better choice is to be smart in your underwriting and invest in good properties that generate cash flow. Then, no matter what the market does, you will earn a solid return on your investment.
Another thing we do at Nighthawk Equity (our investment company) to keep our investors’ money safe is focus on what I call “boring” markets. Syndications on the coasts ARE subject to sensitive to market cycles. But we look for less volatile location like in Memphis, Alabame, and the Sunbelt.
Syndications in stable markets aren’t subject to boom and bust cycles, and that helps us sleep at night, regardless of what’s happening in the economy.
So, if you’ve been hesitant to invest in apartment buildings because of a possible recession, know that there is no safer place to put your money:
- Multifamily performed remarkably well during the last recession;
- The demand for affordable housing will remain strong in the foreseeable future; and
- Invest with experienced operators who underwrite conservatively and buy cash flowing properties in stable markets
Yes, it’s important to pay attention to what the market is doing, but that doesn’t mean you should be paralyzed with fear. Of all the options, multifamily syndications are by far the best investment, especially if you focus on B and C buildings in stable markets.
If you’re interested in potentially investing with us, consider joining the Nighthawk Investor Club!