Competition for Real Assets

This is certainly a competitive time for multifamily investors. During this inflationary period where prices are rising on everything from groceries to used cars, investors are seeking assets that can beat inflation. As a result, the multifamily space is doused with competition from investors who want better returns and downside risk from real assets.

It is no secret that Florida, my primary market, and is among the attractive markets for multifamily. Well-known and popular cities remain highly competitive, driving up prices as bidders compete for the award of these prized assets. How can we be competitive in such an environment? One way is to look where fewer are looking.

Typically, the higher competition is in the larger unit sizes. Staying in the 30-50 unit-size range limits some competition from larger institutions that compete for multifamily in select markets. Secondly, having a strong local market understanding creates a competitive advantage. Having lived in Melbourne, Florida for years and being invested in nearby Palm Bay since 2019, I can see firsthand the shortage of rental housing, the rising of local rents and quickly check out any asset that comes to market for a first look.

Leading Indicators

Secondly, by using leading indicators to identify potential emerging markets, one can create great opportunities to buy at relative low prices. One leading indicator that piques my interest is the U-Haul data on on one-way trips to each state. Can you guess which state received the highest growth one-way U-Haul visits in 2020? This may surprise you.

1) Tennessee
2) Texas
3) Florida
4) Ohio
5) Arizona

People want to live where there is a balance between beauty and affordability. As higher-demand, well-known locations continue to rise in population, so does the cost of living. Tennessee appears to be on the rise due to not having income tax, being business friendly and having plenty of jobs. As you can see, both Texas and Florida remain at the top of the list for continued growth in one-way Uhaul trips. More to come as we pay attention to emerging market data.