With Much Still Uncertain in the Market, Multifamily Investors Are in a Holding Pattern
Before the pandemic, interest rates were lower than ever and rents were rising — making multifamily commercial real estate a strong avenue for revenue generation. The pandemic accelerated positive shifts with this specific asset class as well, creating new housing and migration patterns, lower-than-ever interest rates, and other benefits that further made multifamily properties a great investment. But a few years later, much has changed. Interest rates are still high — along with the cost of insuring and operating these assets.
While the Federal Reserve has indicated that it could begin to lower rates in the coming months, experts are thinking that may not come as soon as they’d hoped. With high rates still in place, household formations beginning to once again change, and other challenges, delinquency rates on commercial mortgage backed securities (CMBS) saw an uptick in Q4-23 (though multifamily assets’ share of this delinquency was among the lowest).
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Despite the Downturn, the Forecast Still Looks Strong for Multifamily Assets
The Mortgage Bankers Association (MBA) recently forecasted that multifamily lending is expected to rise to $339 billion in 2024 — a 25% increase from the estimate of $271 billion made last year. Part of this is hopes that interest rates will indeed begin to drop and cap rates will fall, which should help to boost property values and encourage new lending. While much remains to be seen, general partners that currently manage multifamily assets or that are considering such assets this year would be wise to evaluate their current processes and technologies, including:
- How they identify the best opportunities and pitch them to investors
- How fundraising and capital calls are conducted and managed
- How investor communications around multifamily assets are handled
- How bank accounts for assets are established, funded, and managed
- How distributions are handled once the asset begins to generate returns
- How reporting for investors and your own firm is prepared and shared
Even in 2024, the broader commercial real estate industry remains behind when it comes to technology and efficiency. While tools to help firms with the above are readily available, two issues often arise: 1) their implementation in a CRE firm is delayed due to personal preferences for in-person interactions and transactions, and 2) multiple solutions are adopted within a firm, creating complexity, the need for integration, and other challenges.
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Tackle Multifamily Investment Management with Covercy
At Covercy, we’ve built the industry’s first real estate syndication platform where banking meets investment management. With solutions for everything from fundraising, capital calls, and asset/investor database management to automated distributions and CRE banking tools, everything you and your team need to streamline multifamily investment management is available for you in one platform. Covercy also brings seamless reporting, flexibility for complex deal structures, tax calculations, and countless other features together to help you serve your investors better than ever and maximize revenue.