721: Commercial Real Estate Could Crash, But Are Everyday Investors Impacted
BiggerPockets Real Estate Podcast
BiggerPockets
4.8 • 16.5K Ratings
🗓️ 31 January 2023
⏱️ 59 minutes
🔗️ Recording | iTunes | RSS
🧾️ Download transcript
Summary
A commercial real estate crash is looking more and more likely in 2023. Rising interest rates, compressed cap rates, and new inventory about to hit the market is making commercial real estate, and multifamily more specifically, look as unattractive as ever to a real estate investor. But with so much money still thrown at multifamily investments, are everyday investors going to get caught up in all the hysteria? Or is this merely an overhyped crash that won’t come to fruition for years to come?
Scott Trench, CEO of BiggerPockets and host of the BiggerPockets Money Podcast, has had suspicions about the multifamily space since mortgage rates began to spike. Now, he’s on the show to explain why a crash could happen, who it will affect, and what investors can do to prepare themselves. This is NOT a time to take on the high-stakes deals that were so prominent in 2020 and 2021. Scott gives his recommendations on what both passive and active investors can do to keep their wealth if and when a crash finally hits.
But that’s not all! We wouldn’t be talking about multifamily without Andrew Cushman and Matt Faircloth, two large multifamily investors who have decades of experience in the space. Andrew and Matt take questions from two BiggerPockets mentees, Philip and Danny, a couple of California-based investors trying to scale their multifamily portfolios. If you want to get into multifamily the right way or dodge a lousy deal, stick around!
In This Episode We Cover:
The commercial real estate crash and bad news for high-interest rate investors
Cap rate compression, rent stagnation, and red flags for the multifamily market
Recommendations for both active and passive multifamily investors
How to vet a real estate syndication deal when raising private capital
Scaling from small to large multifamily and why the jump is easier than you think
Cash flow vs. appreciation and which is a better bet if valuations start to tank
Balloon payments, adjustable-rate mortgages, and risky financing options putting new investors in a tough spot
And So Much More!
Links from the Show
Find an Investor-Friendly Real Estate Agent
Listen to All Your Favorite BiggerPockets Podcasts in One Place
Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts
Get More Deals Done with The BiggerPockets Investing Tools
Find a BiggerPockets Real Estate Meetup in Your Area
Understanding Rental Property Depreciation—A Real Estate Investor’s Guide
House Hacking 101—What It Is and How to Get Started
Your Debt-to-Income Ratio Can Make or Break Your Investing Career
On The Market Podcast 65 with Ben Miller
On The Market Podcast 71 with Brian Burke
BiggerPockets Real Estate Podcast 708
BiggerPockets Real Estate Podcast 719
Book Mentioned in the Show
The Hands-Off Investor by Brian Burke
Connect with Andrew, Matt, Dave, and Scott:
Andrew's BiggerPockets Profile
Click here to check the full show notes: https://www.biggerpockets.com/blog/real-estate-721
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Transcript
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| 0:00.0 | This is the Bigger Pockets Podcast. Show number 721. |
| 0:04.4 | Keep in mind, bigger is mentally more daunting, but bigger is easier. |
| 0:09.4 | It's the same amount of work to take down a 10 unit as it is to take down a 100 unit. |
| 0:14.3 | So my philosophy is go as big as you comfortably can, and my mean comfortable |
| 0:21.2 | is without putting you or your investors at financial risk. |
| 0:24.7 | But just don't be scared by the fact that, well, it's 100 units. I've never done that yet. |
| 0:29.0 | If you've taken down a 10, you've taken down a 100, and it's just the amount of the finances, |
| 0:33.6 | and it actually gets easier the bigger you go. |
| 0:35.8 | What's going on, everybody? This is Scott Trench, temporary guest on the Bigger Pockets Podcast here |
| 0:42.0 | with the host, Dave Meyer. Sorry, I still left from you, Dave. |
| 0:44.9 | I don't know. I don't know if I'm the host of the guest, whatever it is. We're here together, |
| 0:48.1 | and we're taking over the show today. Well, yeah, thank you for having me on today, Dave. I appreciate it. |
| 0:53.3 | Yeah, of course. I mean, you're very smooth at that intro. You're an old hand at this. |
| 0:57.7 | Yes. We wanted to have you on because we've had a couple of questions. |
| 1:03.7 | You and I have actually had a lot of great conversations offline about this. |
| 1:08.5 | You have some really interesting thoughts and frankly, some concerns about the multi-family |
| 1:13.4 | commercial space that we're going to talk about here for the first 20 minutes of the show. |
| 1:18.6 | Yeah, I do. I think that the commercial multi-family has enjoyed a really phenomenal run |
| 1:26.9 | in creating a tremendous amount of wealth over the past 10, 12 years. As rents have really grown, |
| 1:32.9 | almost an accelerating fashion for the last decade, as interest rates have come ticking down |
| 1:39.7 | over that time and as cap rates have come down. That's created an incredible environment for |
| 1:46.0 | wealth creation that I think is, I worry, has run its course and is set for to give a lot of |
... |
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