Cap rates affect multifamily investing more than most investors come to realize. If you’re in the commercial real estate space, you know that as cap rates decrease, price points for apartment complexes increase. And, as cap rates start to expand, multifamily prices begin to dwindle. With rising interest rates and high labor/material costs, the multifamily market should see a decline in property valuations. But that isn’t what’s happening.
Behind the scenes, a group of investors is unknowingly keeping this multifamily boat afloat, artificially inflating cap rates and keeping prices at record highs. The problem? This makes average asset prices skyrocket to almost unaffordable levels, ruining the playing field for any investors who can’t outright buy a multi-million dollar property in cash. Ashley Wilson, experienced multifamily investor, calls this the “cap rate con” and blames much of today’s high multifamily pricing on it.
Ashley is a veteran real estate investor with a decade and a half of experience. She’s been investing in large multifamily housing since 2018 and is shocked at what’s happening today. This “multifamily madness” is affecting investors across the board, and she’s convinced that it must come to an end. But what’s causing these inflated prices? How are multifamily investors reacting? And is there still space for the new investor to make money? You’ll have to tune in to find out!
Dave:
Hey, everyone. Welcome to On the Market. I’m your host, Dave Meyer, with James Dainard joining me today. James, what’s up, man?
James:
Oh. Just hanging out in the cold, rainy Seattle.
Dave:
I think we’re back to having the same weather. It’s just dark and rainy and … I don’t know.
James:
Got my space heater at my toes. Yep.
Dave:
Did you know that Amsterdam rains significantly more than Seattle?
James:
I was explaining that to my wife when we were trying to plan our vacation out there. She’s like, “No way.”
Dave:
Yeah. No. But…
