By: Nate Gant
There have been significant changes in the multifamily sector over the last few months. At the moment the question remains, what do all of these changes mean, and how can we adapt?
Observations in lending since January 1st, 2022:
- Interest rates have increased roughly 200 basis points
- There is an emerging trend of lenders offering reduced time they will amortize multifamily loans from 30 years down to 20 years
On one recent deal in particular, we experienced two large rate increases and lending changes, all within one week of being under contract. These variables raised the debt servicing from $169,000 per year to $293,000 per year. Unfortunately, for this particular deal, this meant that the buyer would be losing over $60,000 per year if they purchased the property at the agreed upon price, based on current actual financials. Subsequently, this deal didn’t work out for the buyer or the seller.
Rising interest rates and inflation have left us with more big questions in the multifamily world. What happens now? Will rents continue to rise? Where will interest rates go? What is the future of lending, and how will inflation affect pricing? We are finding ourselves in an environment that hasn’t been navigated in over 40 years. One thing that we can count on is that our current world changes at a faster rate than it did 40 years ago, and there are always opportunities for both buyers and sellers to pivot to their advantage in this constantly evolving marketplace.
Let’s have a conversation. I would love to chat with you about how the current market could affect your portfolio and how to take advantage of these changing conditions to accomplish your real estate goals.
Nate Gant is an Advisor with SVN Cornerstone. Nate has been an active member of the Eastern Washington real estate community since 2010. He has brokered more than $100 Million in real estate transactions, specializing in land development, REO and investment properties. To get in touch with Nate, email nate.gant@svn.com or call 509.993.4440.