The last few months of selling multi-family apartments throughout the Twin Cities has been crazy! In just the past two months, I’ve sold close to $10M in real estate, which consists exclusively of multi-family apartments located in South Minneapolis. But right now, I’m running into a challenge I haven’t experienced before: finding well-qualified buyers for these multi-family apartments.
I’m of the belief that those who succeed in investing often have a contrarian viewpoint to the rest of the general public. When people are buying, YOU are selling. When people are selling, YOU are buying. And right now, in the Twin Cities market, people are selling. Does that mean that you should be buying? Well, that depends. Below I’m going to highlight three reasons why right now there’s a unique opportunity to BUY cash-flowing assets in the Minneapolis/St. Paul market. Then, you can decide if now is the right time for you.
1. INFLATION! (said in a deep, super-scary voice)
I’m sure you’ve seen this posted somewhere online, “The United States has printed more money in the past year than it has in the previous 100,” or something like that. I’m not sure about the validity of this statement, but one thing I do know is that the government is indeed printing money like crazy.
There really is only one result when the government continues to print money, and that’s inflation. Meaning, if your money is sitting in a bank account or a brokerage account not earning a yield keeping pace with inflation, then your dollars are LOSING value. Read that again—if your money is in the bank, it’s going to be worth LESS tomorrow than it is today.
This is a major reason why right now is an excellent time to buy apartment buildings. Get your money into real assets that intrinsically go up in value while also producing cash flow.
2. Minneapolis’s “Social Unrest”
What happened in May 2020 to George Floyd was awful. And the ensuing unrest in Minneapolis made for a challenging time. Although, more than a year later, there’s still this idea that the unrest in Minneapolis is continuing. Which, if you’re a resident of Minneapolis, you know is untrue. The city is just as safe to live in today as it was prior to May 25, 2020.
Most of the apartments being sold in the Twin Cities are being sold by mom-and-pop operators between the ages of 60 and 80 years old. These are the same people who watch the nightly news about all the “social unrest.” These owners are electing to sell their buildings, when they otherwise wouldn’t, citing the city’s safety concerns.
I see this as an opportunity for both Emily and me and my buyer clients to purchase well-maintained and well-cared-for apartment assets in locations that over the long haul are going to be just fine.
Which group are you in? The group that’s watching the nightly news freaking out about how bad the city is, or the group buying long-term generational assets?
3. “Rent Control Will Destroy Us All!” (kidding, obviously)
The other hot topic for the mom-and-pop apartment owners is rent control. Both Minneapolis and St. Paul have proposed rent control policies working their way through the system.
Typically, the sentiment on the apartment-owner side of things is that these policies are bad for the overall health and well-being of affordable housing. There are many real-life examples of other cities in the country that are demonstrating this, but I won’t take a side here on whether rent control is a bad thing or a good thing.
What I will say is if rent control policies are enacted in either city, there’s data demonstrating that a significant portion of the apartment owners out there will be minimally affected, if at all. The University of Minnesota put out a great webinar on this topic after responding to a request from the city of Minneapolis. Check that out here.
Essentially, they concluded that even if the strictest of rent stabilization programs were enacted in Minneapolis, a majority of owner/operators in the apartment business would be minimally affected. What the U of M study didn’t consider was how these stabilization programs could affect the overall housing market and supply, which to me, is a much greater concern.
So, the question you’re asking is: “Paul, how the heck does this tie into this being a great time to buy apartments?” Well, I’ll tell you.
Many of these long-time apartment owners are feeling that rent control is a VERY BAD thing (which the U of M showed isn’t necessarily the case). And because of that, these owners are considering selling when they otherwise wouldn’t. And we know from the basic laws of economics, when supply goes up, prices go down.
These are just a few of the reasons why I think it’s an excellent time to be buying more (or your first) multi-family apartments. There are many more, like cash-on-cash returns in the double digits, and forced appreciation, but I’ll leave those conversations for another time.
In closing, if you’re connected with anyone in the apartment business that’s looking to buy multi-family assets, please, please, please connect us! I’ve got too many opportunities right now that need to be paired with qualified, well-intentioned buyers.
And as always, if you’d like to connect one-on-one about multi-family investing or how you can step into this wild world, let’s schedule some time to chat, grab a coffee, or some grub at Freehouse.
Urban Realtor Paul@DRGMpls.com
952-847-3406Posted by Paul Begich on