How tf is anyone buying multi right now?

We are officially into the 2 caps and good deals in good markets are still getting 30+ offers at guidance. How is anyone making sense of this? 

Comments (39)

Jan 12, 2022 - 3:17pm

Best as I can tell, some of it is due to these family offices. I am on the AM side and at least 50% of the final offers we have gotten over the past 6 months are from family offices that don't have a ton of true multi experience. And we have been transacting quite a bit.

But hey, I'll sell deals at 2-caps all day long.

Most Helpful
Jan 12, 2022 - 4:40pm

1031 buyers/family office who rely on broker bullshit on private capital side, blackstone & large PE firms comopressing cap rates due to capital allocation strategy and bench marking to bonds at sub 2% and multiples of corporate being insanely high, tech fucktards who can think 5% YoY rent growth is normal, f**ktard syndicators and any other mother f**ker with OPM who is more focused on fees.

Groups buying value add showing 15-18% IRR are trending cap rates down and using 4% to 7% rent growth through hold period.  Drunken math has worked the last 5 years so the dance continues!!  

HAVING BIG SAGGY BALLS AND BUYING INFLATION STORY.  I am hearing of sub 2 caps with groups trending to 3%.  Listen to W&D podcast with Peter Linneman this morning as well as a panel he had with some folks discussing the market in 2021Q4 on market dynamics. Game is burn off loss to lease with additional rent growth!  Also, single family home monthly mortgage keeps going up due to K shaped recovery to buy a second or 3rd home, crypto money, generational wealth transfer, tech money, etc that can pay FAWWWK YOU MONEY or 20% above ask.  Before you know it, folks will be spending 50% of income on rent.

I think there is a case to be made that there is a spread between institutional and private capital cap rates, so you are seeing instituional groups now deep their toe in sub 100 unit assets to play the cap rate game that private capital deals will compress.

Scary to think how this might shake out but too much capital on the sidelines, so even if interest rates go UP, you will still see cap rates compress.  Where else do you put those funds?  FAWK do I know.  


  • 12
Jan 12, 2022 - 5:17pm

We have to figure out a way to build more housing as a country. I agree with you that all the dynamics are in place for single-family values to continue to grow at above inflation over a very long period of time, which will lead to the scenario you said (people spending 50% of their income on housing). Housing has historically been cheap in the US...I think we are seeing that starting to flip in a major major way and that will have serious societal ramifications. There is a strong cultural bias towards homeownership - this isn't going to become a nation of people who are happy to rent overnight. I have friends who make $300-500K between them and their partner and they think housing is unaffordable. That's 5-10x the average median income. 

We need more apartments, we need more townhomes, we need more condos, and we need more single-family homes. A lot more. 

  • VP in RE - Comm
Jan 13, 2022 - 8:19am

Fair point on US historically being cheaper. I look at cities in Europe and see that people "figure it out" (live with relatives, stay with parents until they are older, live in smaller units, etc.).

  • Investment Analyst in PE - Other
Jan 12, 2022 - 5:36pm

Rents are increasing at double digit rates, and if you're not forecasting that you're a chump

  • VP in CB
Jan 12, 2022 - 6:25pm

Personally speaking, my rent went up 15% in October which luckily I can afford; however, there are numerous people in my complex (suburban apartments, Midwest, 20min outside of Tier 3 city) that are leaving as they either cannot afford or do not want to pay the astronomical rent increases - some moving in with family/girlfriend, others finding different options (lower quality/smaller apt etc).  Vacancies seem to be rising in my complex but that's obviously very antidotal - for my own sake, I'm hoping some of these property managers realize they only can increase rents so much before people start leaving & getting new tenants becomes harder.

EDIT: Just checked the going rent rates for my apartment complex.  They are down $100-200 a month just in the last couple months and the same exact unit is now ~$100 cheaper than I am currently paying.

Jan 13, 2022 - 7:54pm

It is extremely competitive out there but here are a few things that I have been seeing in the market. 

1) Large Loss to Lease has resulted in a lower cap rates. It will be interesting to see what happens once we collapse the loss to lease and we do not see the incredible rent growth we've seen recently YOY. 

2) Adding rocket fuel to that is the bridge funds are lending at high leverage at rates that are competitive with the agency along with funding the cap ex budget. They are essentially paying you for the large LTL you have on your books.

3) Capital Allocation - Where else are you going to put your money into today that makes you feel confident you can get to your returns? Even at a 8-12% IRR it's tough to replicate those returns in a steady asset class. 

  • VP in RE - Comm
Jan 15, 2022 - 10:34am

What i don't understand is how you finance LTL. If you can get to a 4 cap by bumping rents 20+%, that would mean your in-place cap is like a 2 cap, which will dictate financing. 

Jan 14, 2022 - 9:12am

While I've learned no one knows anything. I'll take a stab here…pricing will get better once the large institutions can invest in office/hotel again (and maybe retail though even before the pandemic many institutions stayed away). Some of the Capital which should be going to office and hotel (and retail) will get reallocated and pricing should get better. 

Jan 15, 2022 - 11:45am

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