1251 - Multifamily Is at High Risk of Continuing Its Historic Crash in 2024—Here’s Why by Scott Trench Part 2
Mar 18, 2024
auto_awesome
Discussing the current multifamily and commercial real estate crash with significant wealth loss, surge in cap rates, and declining asset values. Exploring challenges facing multifamily real estate in 2024, including oversupply of units impacting rent growth. Analyzing the impact of higher interest rates on rental demand and the shift towards single-family homes over multifamily rentals.
Short-term rentals offer higher cash flow compared to long-term rentals, making them a lucrative investment option.
Oversupply of multifamily units in markets like Texas and Florida may lead to declining rents and challenges for property owners.
Deep dives
Investing in Short and Medium-Term Rentals for Higher Cash Flow
Short and medium-term rentals offer double the cash flow compared to long-term rentals. Rental retirement facilitates investing in turnkey short and medium-term rentals, providing managed properties for maximum cash flow, appreciation, and equity. Creative financing options like interest rate buy downs and low down payments make investing more accessible. The high reputation of rental retirement among investors highlights the attractiveness of these investment opportunities.
Multifamily Market Risk in 2024 Due to High Construction Supply
The multifamily market faces risks in 2024 due to extensive construction supply. With a record number of units under construction and expected deliveries, rent growth prospects are bleak. High inventory levels from ongoing construction projects will increase competition, limit rent growth, and potentially lead to declining rents in many markets. The oversupply of multifamily units poses challenges for property owners and developers, especially in markets like Texas, Florida, North Carolina, Denver, and Phoenix, where the supply exceeds demand expectations.
The multifamily and commercial real estate crash is in full swing. As much as $2.7 trillion in wealth has been wiped out with a historic surge in cap rates and plummeting asset values in the commercial real estate world, with multifamily and office leading the charge with estimated 30% and 35% peak-to-trough declines in asset value and even larger percentage declines in equity value.