The Patient Investor’s Advantage in Today’s Market - E1195 - RMR

Yeah, so back in 2019 and the early part of that cycle, we saw in these markets were hot.

We saw that rent was way under market.

That made it attractive for us because the deals that we saw come to market, there were value-added deals going in there, renovating, making the units nice and new, and then you can increase their.

So that was a value-add piece of it there.

Many of these buildings, 1980s, 1990s, 1970s, in some cases, you needed to get in there Do the value add, increasing the cash flow increases the valuation of the property.

But not only did us as investors see that happening, developers saw that as an opportunity as well.

Reds were going up 10, 15, maybe even 20% a year.

And so it was like the gold rush, right? Everybody rushed in.

They started building.

People started buying.

Prices started going up.

And it was great because the returns were there.

Now, What happened was in about 22 is that inflation got away.

Interest rates started climbing extremely fast.

So if you didn't get a good loan on your building, then you got caught with your pants down because now your cost of capital is increasing astronomically.

You have builders building.

So there's a lot of new supply coming online.

So as we have these buildings in the market, now all of a sudden it's like a big break to the market.

You can't really go out and buy buildings because cost of capital is too expensive.

A lot of new supply coming online, competing against you.

And it basically put a break on the entire cycle.

We've been fighting this, and this is about three years now, right? You're fighting the supply.

You're fighting high interest rates.

If you've got a good building, all of a sudden your projections on your rents, you're not hitting it.

But you still have all your expenses.

Yeah, so back in 2019 and the early part of that cycle, we saw in these markets were hot.

We saw that rent was way under market.

That made it attractive for us because the deals that we saw come to market, there were value-added deals going in there, renovating, making the units nice and new, and then you can increase their.

So that was a value-add piece of it there.

Many of these buildings, 1980s, 1990s, 1970s, in some cases, you needed to get in there Do the value add, increasing the cash flow increases the valuation of the property.

But not only did us as investors see that happening, developers saw that as an opportunity as well.

Reds were going up 10, 15, maybe even 20% a year.

And so it was like the gold rush, right? Everybody rushed in.

They started building.

People started buying.

Prices started going up.

And it was great because the returns were there.

Now, What happened was in about 22 is that inflation got away.

Interest rates started climbing extremely fast.

So if you didn't get a good loan on your building, then you got caught with your pants down because now your cost of capital is increasing astronomically.

You have builders building.

So there's a lot of new supply coming online.

So as we have these buildings in the market, now all of a sudden it's like a big break to the market.

You can't really go out and buy buildings because cost of capital is too expensive.

A lot of new supply coming online, competing against you.

And it basically put a break on the entire cycle.

We've been fighting this, and this is about three years now, right? You're fighting the supply.

You're fighting high interest rates.

If you've got a good building, all of a sudden your projections on your rents, you're not hitting it.

But you still have all your expenses.