Competition for multifamily assets is fierce. While there are already a lot of investors competing for deals, a new group of buyers is showing up to the offering table: first-time real estate investors. On Transaction Talks panel at RealShare Apartments, David Harrington, EVP and national director at Matthews Multifamily Advisors, said, “We are seeing an influx of people that have never owned an investment property, but they have capital that they want to place.” He wasn't alone. The panelists—which included moderator Joshua Luchs, first VP of Investments at Marcus & Millichap; Otto Ozen, EVP at The Mogharebi Group; Jeff Burns, managing director at Walker & Dunlop; Jonathan Nikfarjam, managing principal of multifamily investment sales at Coldwell Banker Commercial Advisors El Segundo Office; and Chad Sanderson, principal of business development and acquisitions at the Bascom Group—agreed that there are more new players entering the market.

“We have seen a lot of new money enter the market,” Nikfarjam said on the panel. “I have definitely worked with a lot of new buyers, and that is someone that needs some handholding.” Sanderson added that 20% of assets sold in the last 12 months have gone to new buyers, and agreed that they need more handholding. “There is a lot more handholding, and so you need a great broker,” he said.

In addition to new buyers, the panelists are also seeing more activity from foreign buyers.

Although values have increased and there is becoming a growing disconnect between buyers and sellers as a result, the fundamentals are still strong. In fact, some recent buyers placed long-term debt on a property thinking they would execute a long-term strategy, but, because of the steep increase in prices, those owners are already returning their properties to the market with long-term debt attached. “The recovery has been so strong, and I think people came in with long-term debt strategies and the market has been so strong that they have become sellers. You see a lot of deals with long-term debt in place,” added Sanderson. “You can really strengthen your corporate balance sheet through transactions.”

Off-market transactions have also increased with the competition. “You have buyers actively approaching owners, and you have brokers telling owners that they can deliver a buyer,” said Nikfarjam. “There are clear risks with off-market inventory, but it is something that we have seen more of this year.” Sanderson added, “There is capital that will step up and pay a high price for the right deal. We love to buy off market, we think there are inefficiencies that we can take advantage of.”

Although the fundamentals are strong, there are still some areas of concern. Burns said that rent growth is slowing and there is some concern about rising interest rates—but those aren't detouring the market. “We are seeing rent growth slow down, but a lot of the fundamentals that have driven this cycle are still in place,” he said. “There is some interest rate risk on the horizon, but the market is strong. Fannie and Freddie are very bullish on the fundamentals of multifamily, and there is no talk of reeling in credit parameters.”

In addition to new buyers, the panelists are also seeing more activity from foreign buyers.

Instant Insights /

Influx of First-Time Investors Arrive to Multifamily

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