Hey, Small Axe community, it’s Nico here. This show and blog post are dedicated to helping you use your small axe to build a personal empire. In today’s post, I’m going to share some real, raw, behind-the-scenes information that will help you build your own multifamily portfolio. Success in multifamily investments has always been about understanding the market’s nuances. Let’s dive in.
### The Shift in Broker Dynamics
For years, I’ve spent my time diving into multifamily properties, looking at deals, and providing feedback to brokers. However, the landscape has changed. Previously, old brokers would frequently call me, but now, new brokers are reaching out instead. This shift indicates a changing market dynamic.
To understand this further, let’s consider the following:
– **Market Knowledge:** My historical offers have always been around 70-80% of the asking price. This isn’t about lowballing; it’s about realistic and sustainable investments.
– **Broker Strategies:** Brokers are pushing numbers higher, and many deals seem overpriced. This was different 20-30 years ago when multifamily properties were generally cash-flowing and viewed as better deals.
### Today’s Competitive Market
In August 2024, the multifamily market is marked by fierce competition:
– **Increased Competition:** There are many multifamily investing groups, mentorship programs, and meetups, making the market more saturated than ever before.
– **Price Projections:** Two to three years back, the market was hyper-competitive with inflated prices, often based on proforma numbers rather than realistic expectations.
But should everybody be buying multifamily properties? I don’t think so. Many brokers are capitalizing on high demand without accounting for market realities.
### Adjusting Expectations
Here’s what I am doing now to navigate this market:
– **Underwriting for Market Rents:** I’m focusing on current market rents without overestimating growth.
– **Realistic Projections:** I’m making year-two projections without any rent increases and only a modest 3% growth by year three.
This strategy helps to avoid the pitfalls of relying on speculative projections.
### Embracing New Opportunities
Recently, I received a call from a new broker from a larger firm in Orlando. This broker, having started his own firm, displayed incredible initiative by calling property owners like myself. He presented two off-market deals, with seller-financing options.
While I’m still adhering to my principle of offering 70-80% of the asking price based on my in-depth knowledge of local market operations, the broker’s hustle was commendable. It’s essential to offer strong terms based on realistic property performance and to appreciate the efforts of proactive brokers.
### Challenges in the Current Market
Investing in today’s market requires awareness of several challenges:
– **Vacancy Rates:** There’s an increased vacancy rate, taking longer to lease units.
– **Market Conditions:** Understanding market over-saturation and increased inventory is crucial.
– **Realistic Underwriting:** Don’t base your investments on optimistic proforma numbers. Ensure that your deals cash flow under current conditions.
### Seeking Help and Providing Value
If you’re struggling with underwriting, reach out to me. I have a free model that can help you get started, with an improved version on the way. Contact me at info@smallaxecommunities.com for assistance.
### Final Thoughts
Thank you, Small Axe community, for your continuous support. If this blog post provided you with value, please share it with someone who could benefit from it and consider leaving a review. Remember to keep sharpening those axes and crush your investment goals! Reach out anytime; I am here to help you navigate these complex market waters.
Crush the week ahead, and know that I’m here for you, providing value and support. I love you all.
Love,
Nico
