What’s happening August 2023 in the Floridas commercial Multifamily market?
One of our goals at Grow Inn Homes is to own and operate 200 multifamily apartment complex units by 2026. We are in August of 2023 and this is our opinion on the current state of the multifamily garden style 5-100 unit sized market. This is based on daily interactions with brokers, owners, and property managers.
- It seems like banks are pencils down at the moment. If you want to get their pencils up the investment has to be cash flowing day one. Investors need to get a really good deal or put in a large down payment to structure the deal to cover the operating expenses, debt, and still cash flow. A higher debt coverage ratio is important right now, the banks are not loaning on tweeners. Money is not cheap at the moment and banks don’t look at “pro-forma cash flowing” properties and capital intensive fixer upper projects. They need to see the asset cash flowing day one at a nice margin after they get paid.
- Some owners on the open market seem to be fishing a high ask price. They feel the market shifting and are seeing if they can get their number. If they don’t get it they’ll just renew leases and keep operating. Some of these garden style owners are taking the risk and going without insurance. We spoke with an owner in Stuart that said their insurance went from $19,000 annually to $54,000 within the last few years. Check out our blog about what’s going on with insurance companies in Florida.
- There are a lot of off market deals traded historically in this asset class and still happening. Owners are selling to other owners they know from fortified relationships. Brokers that are direct to the owners and are underwriting accurately are still trading off market deals to their relationships too.
- Seller financing is getting more popular as interest rates continue to rise. There are owners that are very open to seller financing. They get their down payment, guaranteed price every month, and are able to pass down their note in a trust. Some are at the end of their investment career and are pleased to switch from being the owner operator to the lender. No more dealing with operating expenses, vacancy, maintenance, ect. It also gives them the ability to help the next owner by allowing them to structure the deal in favor of both parties without all the bank fees.
- The Future is Bright:
- There are still good deals out there. What we have learned is to build relationships with the top owners. Multifamily investing is long term. This form of investing aligns more with who we are as a team and what we stand for. Sow the seed, care for the seed and watch it grow to be a strong tree loaded with fruit!