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Multifamily Minute Reader Reflections: Buying, Selling, and Refinancing in 2023
We surveyed 40,000 multifamily investors to ask who's acquiring, divesting, and refinancing in the new year.
For multifamily investors, it is critically important to know when the best time to buy, sell, or refinance a multifamily property is. We ran a survey in last week’s Multifamily Minute newsletter to ask what our readers are planning for 2023.
Investors said they’re far more likely to purchase a multifamily property in the next year than to sell or refinance one. Why? Let's dig in.
Our survey asked our readers to describe how likely they are to buy, sell, or refi an apartment building. The results are in the table below.
Purchase a multifamily property
Sell a multifamily property
Refinance a multifamily property
Neither likely nor unlikely
Is It Really Time to Buy?
As you can see, 42.9% of respondents indicated they were extremely likely to purchase a multifamily property in the next year, with 21.4% stating they were likely going to buy. That’s nearly two-thirds of respondents, showing that — despite economic headwinds — most investors consider multifamily a safe play and don’t plan to stop new acquisitions. Of course, the poll didn’t ask our readers if they would buy more or fewer assets, but that’s something I can focus on in a future survey.
In terms of selling multifamily properties, the majority of our readers indicated that they are either unlikely or extremely unlikely to do so. The survey results showed that 35.8% of investors are extremely unlikely to sell a multifamily property in the next year, while 14.3% said they were unlikely to do so. This is understandable right now, particularly given the massive gap between sellers’ asking prices and what buyers are willing to pay.
Investors Move to Refinance
Looking at the sentiment on refinancing, some interesting results came to light. Nearly 60% of respondents indicated that they were either likely or extremely likely to refinance an apartment building in the coming year.
That may seem counterintuitive, given where interest rates stand, but it makes sense if you reframe the question: Are interest rates right now the highest they’ll be? Undoubtedly not, given what’s been coming out of the Fed these days. If you need to refinance, doing so early this year is going to be far less costly than waiting until later this year.
Of course, as much as I love to look at our survey data, there’s always the usual batch of caveats. Those who responded may not make up a representative sample, and it’s all forward-looking projections. It does, however, give us a nice window into how our Multifamily Minute readers are looking at the multifamily landscape and what they’re planning for this year.
Sign Up for the Multifamily Minute
If you’d like to participate in our next survey, I’d be delighted to get your perspective. Catch up on our latest insights, delivered straight to your inbox each and every Tuesday, by using the form below.
Our Previous Survey
In case you missed it, in mid-December we asked our readers about cap rates — particularly for apartment buildings — and where they anticipate them moving in 2023. You can read our analysis of the results here.
What are the best strategies for buying multifamily properties in 2023?
The best strategies for buying multifamily properties in 2023 depend on the individual investor's goals and financial situation. Generally speaking, suburban multifamily investments are more accessible for most investors from a pricing standpoint. Lower prices can mean that you need less financing, on average, or can even take advantage of some remarkably competitive small balance multifamily loans. At a time when interest rates are climbing, that makes great sense.
In addition, investors should consider the local market conditions and the potential for appreciation. For example, some markets may be more attractive for long-term investments, while others may be better suited for short-term investments. Investors should also consider the potential for rental income and the cost of maintenance and repairs.
For more information, please read our analysis of the results.
What are the most important factors to consider when selling a multifamily property in 2023?
When selling a multifamily property in 2023, the most important factors to consider are the current market conditions, the location of the property, and the condition of the property.
The current market conditions will determine the demand for the property and the price you can expect to receive. It is important to research the current market conditions in the area to ensure you are getting the best price for your property.
The location of the property is also important. Properties in desirable locations will be more attractive to potential buyers and will likely fetch a higher price.
Finally, the condition of the property is important. Buyers will be looking for properties that are in good condition and require minimal repairs. Investing in repairs and upgrades before selling can help you get a higher price for the property.
For more information on selling a multifamily property in 2023, read this article from Multifamily.Loans.
What are the best financing options for refinancing a multifamily property in 2023?
The best financing options for refinancing a multifamily property in 2023 depend on the individual investor's goals and the current market conditions. For those planning to accelerate refinancing plans, life companies, banks, and credit unions might provide the best options, as these lenders often offer early rate locks to protect clients from increasing rates. Additionally, savvy investors looking to hold their properties for a more extended period might consider taking a cash-out refinance to tap into equity accumulated over the years. The highest-quality properties with the most attractive amenities will have an easier time keeping occupancy levels elevated to ensure consistent cash flows during economic volatility. A cash-out refinance allows owners to invest the extra cash into property upgrades to make them more attractive to renters and ultimately turn them into a strong hedge against inflation.
What are the most important tax implications to consider when buying a multifamily property in 2023?
When buying a multifamily property in 2023, the most important tax implications to consider are the capital gains tax, depreciation, and the 1031 exchange.
The capital gains tax is a tax on the profits from the sale of a capital asset, such as a multifamily property. The amount of tax owed depends on the investor's tax bracket and the length of time the property was held.
Depreciation is a tax deduction that allows investors to deduct the cost of the property over a period of time. This can be a great way to reduce the amount of taxes owed on a multifamily property.
Finally, the 1031 exchange allows investors to defer capital gains taxes when selling a property and reinvesting the proceeds into a similar property. This can be a great way to defer taxes and reinvest in a new property.
For more information on the tax implications of buying a multifamily property in 2023, please consult a tax professional.
What are the most important legal considerations to keep in mind when selling a multifamily property in 2023?
When selling a multifamily property in 2023, it is important to consider the legal implications of the sale. The most important legal considerations include:
- Ensuring that all necessary paperwork is in order, including title documents, deeds, and other legal documents.
- Making sure that all taxes and fees associated with the sale are paid in full.
- Ensuring that all necessary permits and licenses are obtained.
- Making sure that all necessary inspections and appraisals are completed.
- Ensuring that all necessary disclosures are made to potential buyers.
- Making sure that all necessary contracts and agreements are in place.
It is also important to consult with a qualified real estate attorney to ensure that all legal requirements are met. For more information, see this article.
What are the best ways to find the right lender for refinancing a multifamily property in 2023?
The best way to find the right lender for refinancing a multifamily property in 2023 is to get professional help. Janover's experienced loan advisory team has thousands of lenders in their Rolodex and can leverage that to secure the best terms for you. Additionally, you can look at the list of top 10 multifamily lenders of 2023 provided by Multifamily.loans. Any of the lenders mentioned there are great choices for your next multifamily deal, as long as your needs are aligned with what your lender is willing to offer you — think loan size, interest rates, even amortization and term. You can also look at the 5 ways to find the best multifamily refinance in a recession provided by Multifamily.loans.