Rising Rates Impact Multifamily

Unveiling the Market's Secrets from Behind the Scenes

Author

Nuvo Capital
August 08, 2024

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“People were actively buying multifamily properties for 2%, 3%, 4% cap rates. Now, the debt for those assets costs 6% or more. Many people are underwater no matter how well they’ve executed their business plan, especially if they borrowed short-term debt.”

-Jon Gitman, Partner at BridgeInvest

Recent Multifamily Sales (Click to view details)

Recent Multifamily Loans (Click to view details)

Question:

What are the risks associated with investing in multifamily properties, and how can they be mitigated?

Answer:

The risks associated with investing in multifamily properties include market fluctuations, tenant turnover, and unexpected maintenance costs, which can impact cash flow and property value. These risks can be mitigated by conducting thorough due diligence, maintaining adequate reserves for repairs, and implementing effective property management practices to retain tenants and reduce vacancies. Additionally, diversifying investments across different markets and property types can help spread risk and enhance overall portfolio stability.

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Household Growth and the Apartment Market

In the multifamily market, rents growth continues to be sluggish, but growing signs of apartment demand support the long-term health of the sector. In the broader housing market, household growth and pent up demand are bracing against affordability barriers like high interest rates.

Quiz of The Week

What does "Subordination" mean in real estate financing?

a. The process of moving a property to a different jurisdiction

b. The arrangement of property titles within a development

c. A change in the order of lien priority for mortgages

sǝɓɐɓʇɹoɯ ɹoɟ ʎʇᴉɹoᴉɹd uǝᴉʅ ɟo ɹǝpɹo ǝɥʇ uᴉ ǝɓuɐɥɔ Ɐ ·ɔ

Random Tip of the Week

🚀 Implement Robust Lease Agreements - Develop clear and comprehensive lease agreements that outline tenant responsibilities, rent terms, and property rules to mitigate disputes and ensure transparency.

Current Rates (Weekly Update)

10-Year Treasury - 3.88% (⬇️.26%)

Fed Funds Rate - 5.33% (0%)

1-Month Term SOFR - 5.28% (⬇️.06%)

About Nuvo Capital Partners

Nuvo Capital Partners is a niche market-focused multifamily investment platform operating throughout the Southeastern United States. As a dedicated sponsor (General Partner), we specialize in institutional quality real estate investments within these regions. Our team comprises industry professionals with 25+ years of combined experience, ensuring expertise and market knowledge. We pride ourselves on offering a transparent investment process, providing our investors with access to high-quality real estate opportunities while upholding integrity throughout.

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