2012 will be a great time to fill your own nest using other people’s money. Lenders and investors of all types of money – private, conventional, insurance, government backed, you name it — are flocking to the apartment market. Do you blame them? Apartment investing is in the early stages of a tremendous run. Who doesn’t want in?
Apartment Investing Highlights
Here are a few highlights from a new report from Co-Star “Apartment Investing Mortgage Activity Enjoys Upswing after 3-Year Slump: Low Interest and Cap Rates Keeping Buyers in the Market”.
- The apartment mortgage market continues to experience an increase in lending from GSE’s, FHA, portfolio lenders, banks, thrifts and commercial mortgage-backed securities issuers, according to new research from Fannie Mae.
- Fannie Mae and Freddie Mac saw the first increase in their total dollar volume of multifamily mortgage and securities acquisitions (purchases and securitizations) in 2011 year after 3 years of declines.
- During 2011, there was also an increase in multifamily CMBS issuance, totaling 16 deals. Life insurers had their second best year on record in multifamily in 2011, reaching $11.1 billion in commitments on 517 loans. This is a significant increase from $4.6 billion in commitments on 244 multifamily loans in 2010. At $11.1 billion, multifamily represented nearly 25% of all life insurer commercial real estate loan commitments last year.
- Banks and thrifts saw a significant increase in total net multifamily real estate holdings during 2011, with the FDIC reporting a net increase of $5.8 billion.
- Fannie Mae expects the 2012 multifamily mortgage activity level to be similar to 2011 as interest rates likely remaining near or at current levels; low cap rates keeping apartment buyers and sellers in the market; apartment sales staying healthy due to new apartment construction coming online; and continued improvement in job growth.
The Mortgage Bankers Association has also reported that multifamily lending is up and believes that banks will continue to keep their sights on lending in the apartment market. The Federal Reserve Bank’s policy of keeping interest rates low for at least two more years certainly supports that notion.
The consistently low vacancy rates in apartment buildings in key markets across the USA is proving a safety net for lenders and investors, especially now during economic uncertainty.
As we have been discussing for quite some time, the number of renters seeking apartments is at its highest level in more than a decade, as more families opt for apartment life rather than home ownership as a means of containing living costs.
Throughout the country, the number of families living in their own homes has fallen from more than 69% to about 65% since 2004. And the nationwide level the apartment vacancy rate has dipped to only 6% with the key market hovering at or below 1%.
However, the banks remain concerned about the reputation and experience of its borrowers and, after the “run-away” conditions that existed through 2009 in the commercial real estate market and have tightened up their current apartment lending standards.
Cash is king in the apartment investing market. And there is alot of money on the sidelines waiting to be placed. Moneymen are at a loss as to what to do with their caches of cash. Government and corporate bonds aren’t paying much in the way of interest these days; they provide safety but they offer meager returns.
Great Apartment Investing = Right Project + Right Market + Right Price
But when you buy the right apartment project, in the right market, at the right price, add value, raise the rents and then refinance in one year to return investors monies, and then selling it in 5 years – it is not unusual to see 40% internal rate of returns.
These returns are getting money people’s attention. Now all you have to do is go land those deals and match the money to them. Not a penny of the deal needs to come from your pockets. You can either flip the deal to an investor for a quick finders fee plus smaller equity stake in the project – or you can stay in the project, help raise the money and insert yourself in for a larger equity stake in the deal.
In both cases, you are not using any of your own cash or credit. You are making money for bringing the deal together.
Apartment Investing is an extremely lucrative, yet complicated business. If you want to do it right, and be taken seriously with the players who control the keys to the best deals, you will need to surround yourself with someone who has the track record and credibility and help you get in and get deals done. Do you Invest in Apartments now? Chime in and let me know what you think of today’s Apartment Market.
Learn Apartment Investing
That is why we have asked Michal Ballard, active apartment foreclosure investor and syndicator and expert instructor and coach to help our investor clients. He has agreed to share his insights for FREE in his Last Professional Webinar “Earn Huge Profits Investing in Apartment Foreclosures” this Wednesday night only.
We expect a full house, so please register here now and login early to the webinar.
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