James Kandasamy of Austin, Texas is a multi-family property investor, developer, and author of two best-selling books. In the following article, James Kandasamy discusses capitalizing on multi-family real estate opportunities amid a stormy market.
The most recent hikes by the Federal Reserve have thrown the real estate market through a loop (or five). With rising rents, high capital costs, and expensive cap rates, multifamily investments and developments have been affected in many ways.
Although, the increasing interest rates are pricing homebuyers out of the market, encouraging spiking rental demands are keeping investors hungry for more.
Even within this turbulent environment, James Kandasamy of Austin, Texas says that there are various opportunities to be found in multifamily investments.
James Kandasamy: Uncertainty Isn't Without Opportunities for Multifamily Investments
The rental sector is experiencing the somewhat debilitating impacts of rising rates and costs to various degrees. Because of this, many companies are looking to fine-tune their current multifamily investment strategies explains James Kandasamy of Austin, Texas.
For instance, many investors have recently decreased short-term growth projections to correlate with the boosted likelihood of a recession.
Experts have spoken on the effects of rising interest rates. Rate hikes increase the necessary return from risk assets. Cap rates for apartments have moved from 100 to 200 basis points, depending on the investment profile and market.
The turbulence has seen the financing environment change drastically. Not only are there higher costs, but there are also lower leverages.
That said, James Kandasamy says that his multifamily development firm is still investing in differentiated, well-located properties in targeted geographical markers. Value-add multifamily investments remain the priority amid uncertain times.
But What About Multifamily Developments
James Kandasamy of Austin, Texas the owner of a leading investment firm says costs have seen some improvements throughout the end of 2022. However, builders face other challenges moving forward.
While contractors are willing to hold prices for longer, lenders are tightening their policies on the projects they are willing to lend. James Kandasamy of Austin, Texas states that some aren't even lending at all, meaning construction cost fluctuations are harder than ever to navigate.
However, James Kandasamy says that not all hope is lost.
Achieve Investment Group
has employed various strategies to mitigate the aforementioned problems and take advantage of the unique opportunities brought by turbulent markets.
Specifically, concentrating on creating a better return for its equity partners.
On top of that, casting a net wider in the multifamily field to reap these substantial rewards.
Multifamily investment strategies should include focusing on urbanized areas or locations that are growing in technology or medical sectors. It is especially beneficial to target highly populated areas like urbanized cities and up-and-coming neighborhoods.
Partnering with other investors is also a key strategy for many firms that want to spread the risk during periods of higher interest rates.
Expectations for Multifamily Investment and Development Opportunities
James Kandasamy of Austin, Texas says that managing expectations is one of the many necessities in all investment strategies, but especially those at play during turbulent conditions. Being realistic with anticipations can be the key to unlocking considerable opportunities.
The good news is that multifamily operators won't see any problems in the short term since they have fixed-rate or interest-capped loans.
However, the challenges will likely occur when the current loans require refinancing. Property owners may need to put money in to get the interest rates they're hoping for.
That said, analysts suggest that this issue will cool off in 2023 once deal volumes peak and buyers and sellers find balance.
James Kandasamy of Austin, Texas says that due to the turbulence, investors should look to minimize risk from the top level by only investing with companies that have a great reputation for creating value and expanding net operating income. The more value made, the more investors can buffer the interest rate hikes.
For new construction, interest rates will begin decreasing, allowing investors to maximize the value of their buildings.
To minimize losses, developers must be confident in their costs and lean into conservative rent numbers and expenses. Ultimately, that's the number one way to reduce risks throughout uncertain times.
Trouble in The Short-Term for Long-Term Prosperity
Even though the short-term headwinds appear strong due to the ever-changing economic landscape, most firms are optimistic about long-term predictions for multifamily investments.
