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Is 2023 a buying opportunity or a time to stay on the sidelines for multifamily syndication investors?

By Blog in Blue Lake Capital —

Are we in a recession or headed into one?

Will the Fed really keep raising rates all year?

Will rents go down in 2023 instead of up?

Will distressed sellers have to give up great properties at low prices?

The list of unknowns for syndication investors is long and growing as 2023 gets underway.

It is worth noting that experts are predicting a wide range of outcomes. Consider two blog posts from well-known observers of the multifamily real estate syndication market:

  • Scott Trench, CEO of Bigger Pockets, makes a tentative bear case for 2023. His article's title: "Multifamily Real Estate Is At Risk Of Crashing — Here’s Why."
  • Ellie Perlman, CEO of Blue Lake Capital, makes a cautious bull case for 2023. Her article's title: "Look For Opportunities, Not Obstacles in Today's Real Estate Markets."

Neither author is claiming that they can predict the future. While more or less agreeing on the facts--interest rates have been climbing, rent growth is at least slowing, distressed deals could reach the market this year--Trench and Perlman come out in different places in their analyses. Granted one (Perlman) is actively raising capital and the other (Trench) is running a media company and investing himself rather than raising funds for syndications, so their perspective may be different for those reasons as well.

Our family's approach is not to time the market, but aim for time in the market--looking for great deals as they arise and sticking to the long-term game-plan. Whether 2023 is a time of "crashing" prices as Trench argues it may be or "opportunities" amidst the rubble as Perlman emphasizes, the take-away from our end may be the same: those with capital, ready to invest in great properties in healthy, growing markets, should be rewarded for staying the course. Dislocation can be painful for some and will reward the serious, patient investor. (And if you invested at the top of the market in an overpriced, over-leveraged asset with a sub-par operator, well... yes, it may be a tough year or two.)

"Cautiously optimistic" and "staying the course" seem like watchwords for 2023. Whether we are in a recession or not, whether interest rates keep rising or not, whatever direction rents go, there are likely deals to be found, offered and run by excellent operators for the patient investor.