The Case for Strategic Multifamily Investing in 2024

It’s hard to believe that the New Year is almost upon us. And certainly from an economic perspective, there have been a significant number of events to generate a mix of both optimism and concern, depending on your market position. It’s difficult at best to predict future outcomes based on these current or past events and yet, here we are once again reflecting on a best investment approach for 2024. One which maximizes our level of return, while minimizing any degree of nonessential risk.

As an equity enthusiast, it’s been encouraging to see U.S. stocks rise in 2023, although, upon closer inspection, at least one trend seems clear and a cause for potential concern. A small number of technology companies are driving an ever-increasing share of these stock market gains, selectively masking the effects that current economic conditions may be having on different sectors. And although the average S&P 500 return over the past 10 years has been 9.9%, a wider than usual range of volatility has resulted in some moments of significant uncertainty for active investors waiting out these sizable fluctuations.

Has real estate faired much better? The apparent residential real estate boom during COVID-19 has now been tempered by rising rates of inflation and the Federal Reserve’s efforts to slow things down through a series of interest hikes. The ensuing rise in mortgage rates has dampened overall sales and property valuation as activity continues to slow here.

We believe the multifamily space, however, continues to show encouraging signs that will present buying opportunities in 2024. Many banks are reporting that investors who established loans for their value added deals during a period of markedly lower interest rates, will be coming up for renewal. As banks require additional capital to meet new refinance requirements, there will be significant pressure on some multifamily owners who are unable to fund these deals in a way which still meets their required IRR (internal rate of return). As a result, well-timed alternative investors working with these special assets managers may collaborate to purchase these assets at a substantial discount.

Many parts of the Midwest have shown a much more measured level of rent appreciation and capitalization rates relative to other parts of the US. And this environment for a continuation of slow and steady growth is what makes us bullish on selective acquisition of multifamily investments throughout various areas of the Region. Indiana, for example, ranks in the top 10 for States with the best business climates and represents a very balanced yet diverse level of employment. Property tax caps, combined with new economic development and favorable rental rate growth provide additional measures of confidence as we search diligently for the next opportunity which will meet current investor demand and provide a significant added value proposition to our existing portfolio.