Real estate markets move in cycles, and understanding history is the key to navigating today’s opportunities. As a seasoned investor with 30+ years in the industry, I take a historically informed, risk-averse approach—where capital preservation is the priority. You'll get market insights and investment strategies tailored to both passive investors and capital raisers, with a particular focus on raising private capital. Occasionally, I also share best practices in digital lead generation on LinkedIn and using AI to optimize lead generation. I also introduce my latest podcast and YouTube series, where you'll hear from capital allocators, unpacking trends, strategies, and the future of real estate capital formation. For those looking to invest smarter, raise capital more effectively, and stay ahead of market shifts, The GowerCrowd Newsletter offers a concise yet detailed perspective on the forces shaping our industry.
For all those who responded to the with-commentary vs. without-commentary survey email last week, thank you.
A massive majority (99%+) prefer the commentary and so this week I have something special for you - a special guest post with Paul Fiorilla, Director of U.S. Research at Yardi Matrix, who provides some insights into supply factors driving multifamily market dynamics, drawing from his latest Report.
In other news: Hold the date April 3, 2024 at 9am Pacific Time.
We are holding a special event with three guest panelists called:
'A lawyer, an accountant, and a real estate investor walk into a bar - the legal, tax, and ethical implications of losing investor capital.'
The title is, I hope, self explanatory of the agenda and I am not sure how much room we will have for attendees so if you are interested in joining us, please pre-register and I'll get you more information as soon as we have it.
By Paul Fiorilla, Director of U.S. Research at Yardi Matrix
The headline: The rapid pace of new deliveries is exerting downward pressure on rent growth in many of the rapidly growing Sun Belt markets. Nationally, multifamily rents were unchanged in January, with U.S. rent growth at 0.5% year-over-year, but growth is negative in almost half of markets, per Yardi Matrix's January rent data.
Under the hood: Yet starts are eroding due to the cost of construction debt and banks' tightening standards. That means supply growth is going to wane after the current batch of under-construction projects is completed. And that's a shame because whatever the short-term impact of the current supply bump, America needs new housing of any and all types to meet demand and improve affordability. (As an aside, I'm honored to work for Yardi, which donated $1 million to the Housing Solutions Coalition, which is advocating for a pro-housing regulatory environment.)
Learn more: Yardi's latest monthly report discusses these issues, which were the focus of discussion at the National Multifamily Housing Council's recent annual conference.
The news: Commercial real estate has moved front and center as one of the scariest parts of the global economy. The deepening disquiet in US commercial real estate and Chinese property markets means it’s now the third-biggest worry for respondents, behind still-high inflation and geopolitical turmoil, according to Bank of America’s Global Fund Manager survey.
More details: With $900 billion in commercial property mortgages coming due this year, interest rate cuts would help the commercial real estate market. But fund managers say the chances of significant rate cuts keep receding as the U.S. job market remains stronger than expected.
Bank worries: Smaller banks are most at risk from a commercial real estate crisis. To head off a meltdown, the Federal Reserve is working with lenders with high levels of risk. Regulators are scrutinizing liquidity levels of those lenders.
Another warning sign: The volume of commercial mortgages at least 30 days late on payment has eclipsed total reserves held by the largest U.S. banks last year.
Healthcare and office sectors led the pullback, with new loan creation volumes decreasing 67% and 65%, respectively, the Mortgage Bankers Association said. Banks’ Real Estate Losses Will Be Hyperlocal (Bloomberg)
“Office is toxic,” one tenant says. Proving the point, many major cities had not a single office groundbreaking in 2023.
For investors
Enroll in this free email series to learn the 8 key financial terms you need to know when evaluating a commercial real estate investment during any phase of the economic cycle.
The news: In another sign of a softening apartment market, tenants renewing leases in 2024 are likely to experience much smaller rent increases than they endured in any of the previous three years. As of January 2024, loss-to-lease measured 3%, a three-year low.
The backstory: During the pandemic, rents soared, spurring a building boom. Now, though, an oversupply is hitting some markets. Loss-to-lease is a metric that reflects the difference between today's market rent versus the average in-place rent. It's a gauge of how much multifamily operators would gain if every current renter paid today's market price.
What it means: A big loss-to-lease number shows current renters are likely to see larger renewal rent increases because their current rent is below market. Renewals are likely to continue to inch up modestly nationally as new leases remain fairly flat, so loss-to-lease should shrink further. Landlords rarely push renewals too hard, because they’re wary of encouraging tenants to move out. In today’s market, characterized by high supply, empty units take longer to fill.
Capital Calls & Rescue Capital
New eBook: A guide to thriving during the coming real estate crash for real estate syndicators and accredited investors. gowercrowd.com/rescue
Background: In this episode of our series on how the tax Code applies to and benefits real estate investing, we are doing a deep dive into cost segregation.
Highlights: Cost segregation is an advanced tax deferral method that enhances depreciation deductions that effectively reduce the amount of taxes owed by property owners. Yonah explains how it can be used to dramatically increase cash flow and profitability.
Why you should watch: Using case study examples, Yonah discusses how to manage potential longer-term liabilities like ‘depreciation recapture’ when selling a property – something I have always thought of as the defining characteristic of the tax code that, ‘what the IRS giveth, the IRS taketh away.’
Please note that I am not an investment advisor or attorney and do not make investment recommendations of any kind. Please seek advice from your financial advisor, accountant, attorney, and any other professional in assessing the risks associated with any investment opportunity, as every opportunity has risks that could result in a substantial loss.
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The GowerCrowd Newsletter
The only real estate investing and syndication newsletter you need.
Real estate markets move in cycles, and understanding history is the key to navigating today’s opportunities. As a seasoned investor with 30+ years in the industry, I take a historically informed, risk-averse approach—where capital preservation is the priority. You'll get market insights and investment strategies tailored to both passive investors and capital raisers, with a particular focus on raising private capital. Occasionally, I also share best practices in digital lead generation on LinkedIn and using AI to optimize lead generation. I also introduce my latest podcast and YouTube series, where you'll hear from capital allocators, unpacking trends, strategies, and the future of real estate capital formation. For those looking to invest smarter, raise capital more effectively, and stay ahead of market shifts, The GowerCrowd Newsletter offers a concise yet detailed perspective on the forces shaping our industry.
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