Multifamily properties will remain the asset class where the largest amount of money is flowing into.
In fact, according to Don Wenner, CEO of DLP Capital Partners, $36 billion of capital has already been raised for deployment into multifamily assets this year alone. Why Class B?
“These types of apartment communities were typically built in the 80s and 90s,” says Wenner. “They’re lower rents, meaning they’re much more affordable to individuals and families than the more modern and newly built Class A communities. With a recessionary market and higher unemployment on the horizon, Class B housing will most definitely generate a better cash flow. Smart money is going into Class B.”
Cash flow will be king.
Wenner continues, “Whether it’s Class A, B, or C, commercial, retail, or self storage real estate, cash flow is what everyone wants these days. Money is, and will continue, flowing to properties that are stable and able to produce good cash flow.”
Real estate values may very well peak in 2019.
Wenner believes that 2019 will be a high water mark in terms of real estate values and these values will soften and go down. When that happens, financial markets will tighten up, demand will decrease, and supply will increase.
The demand for Class B multifamily will continue to increase, while Class A will decline in some markets.
In a number of Tier 1 markets , there is now or soon will be an oversupply of Class A housing.
Wenner says, “With interest rates remaining stable, our real estate investments, mostly located in the southeastern part of the U.S., will experience a 2 to 3% rent growth. With no new supply of Class B housing, there will be an increase in demand.”
Flippers will continue to thrive.
While an increase in concern over financial markets remains strong, single family ‘fix and flip’ operators will remain very active, searching for deals, especially distressed properties. Wenner suggests that we’ll see close to historic investment transactions this year.
Volatility will create opportunity.
Beyond 2019, markets will continue to tighten and liquidity issues will most definitely create opportunities. Sam Zell, founder and chairman of Equity International is quoted as saying, “We’re not buying the market, we’re buying deals. Over 70% of wealth is created during the 10 to 15% of the most turbulent recessionary markets. Distressed does not mean there has to be losses. It’s always volatility that creates opportunity.”
DLP Capital Partners is strongly positioned for growth in 2019. Watch our on-demand webinar to learn the details of our strategy and exactly where we see the biggest investment opportunities over the next 12 months and beyond.