Where Trends in Multi Family and Single Family Investing will occur over next 2-3 Years?

Video Closed Caption:

good morning good afternoon good evening

folks michael zuber one red solana time

it is thursday morning and that means mr

jonathan tumley is back how you doing

sir i’m doing well this is the sleepy

jonathan 12 today

you’re doing great man you’re worried

about a deal you’re up early exciting

it’s it’s all good man a lot of fun yeah

yeah hey so uh we are about to roll into

a new year right i actually just

yesterday put out kind of my forecast

for 2022. but again in your amazing

facebook group you put out a thought

provoking post that honestly i hadn’t

thought about before and that is where

do you see the real estate market in two

years right there’s always next year and

kind of long term but there’s very

little talk about the midterm so um i

thought we should talk about that you

could talk about multi-family and i’ll

talk about residential uh so what uh

what are your thoughts i mean

it’s it’s very hard to say right i mean

it’s it’s it’s in the future and we have

just so many different forces kind of at

work

right now it is it is difficult to say

if you look at sort of like the current

snapshot

of

the supply demand dynamic in

multi-family it’s very good for

multi-family right we have a lot of

household formation the millennials are

really coming into their their prime

household formation years

they need places to live

houses are very expensive they can’t buy

as many houses as they would like

and

there’s no other option but to rent in a

lot of markets especially in markets

where people are moving to uh you know

rapidly like the southeast so

the dynamics are quite good but it’s but

it’s not uh i want everybody to

understand it’s not limited to those

markets i mean we have a housing

shortage pretty much everywhere but even

even in some of the

the slow growing and even like

negatively growing places that the

housing stock is

is aging out faster

than

than the population is declining so i’ve

been hearing anecdotally

about people uh bringing apartments

online in like very small towns and

having waiting lists i was talking to a

guy at a party the other day who has

property in like upstate new york and he

said he has

he just bought a new property he has

people

he’s like a 30 person waiting list oh

wow to rent apartments in this like

three three bet this like three uh unit

place he has and in a small town so this

is happening everywhere so if you just

look at that snapshot

right

things are very good and uh so i would

you know most of the time you just say

well things will just sort of continue

the way they are i think that’s

probably

pretty likely okay however i do think um

that you know i don’t think that the

rent increases that people are getting

right now are sustainable no

uh when you’re talking about you know

sometimes 20

rent increases a lot of this is just the

bounce back from

covid when we had actual rent decreases

and now things are coming roaring back

uh so they’re they’re catching up right

so part of that so you can’t

forecast those things into the future

right and nobody is and if you look and

say like a co-star report you know

co-star is not forecasting these kind of

rent increases well let’s uh let’s be

clear i think there’s some syndicators

that are forecasting them but nobody

with uh a real kind of

oh sure well i mean listen i think there

are some fork some syndicators

forecasting these because they have to

and they have to exactly make the

numbers work the numbers work based on

what they’re paying for their property

it’s crazy deals i’ve seen the last

month yeah so there’s some there’s some

crazy stuff happening um

because there’s this kind of mania about

this fear of inflation and everybody is

driving people into buying uh hard

assets yeah which is what you want to do

during an inflationary uh period but i

mean as we’ve talked about before

you know

this is only hyperinflate you know six

percent inflation is only hyperinflation

if like you were like basically born in

2007 right i mean like it’s

it’s not yeah this is this is basically

like from 1945 until

night like 2005

this is kind of like what inflation was

sort of like three to five percent

all the time

and then sometimes get up to six and so

we’ve actually had this in 1990 we had

six percent this is so this is not

this is not the latin american debt

crisis this is not weimar germany no no

none of those things putting around

wheelbarrows full of money yeah to pay

for a loaf of bread i mean this is just

just a different situation

but people are a lot of people are

acting as it is and there are a lot of

people out there after

stoking panic

for

political reasons about hyperinflation

which just

just doesn’t hyperinflation i mean

something doubles it’s not even double

digit inflation right so yeah it’s so so

but anyway it’s driving a lot of people

into the asset class and driving cap

rates way down and when cap rates go

down you get

uh you’re just adding more risk to your

deal because you have less cushion so i

think that there’s going to be some

there potentially could be some pain if

people are underwriting

to these huge rent numbers uh in order

to

you know justify buying deals

at three caps and if there’s any kind of

hiccup in the economy or if there’s

uh if the inflation thing that uh you

know if everyone if you’re let’s put it

this way if your inflation predictions

are correct right i mean i’m not talking

to you michael i’m talking about people

who are hysterical about it

the fed is going to step in and raise

interest rates and that is going to

cause the economy to cool off a lot

which is going to you know a uh lead to

some job losses which is gonna take some

rent pressure off and b cause cap rates

to rise which is so you’re gonna get the

double whammy

of loss in value and if you haven’t

locked in long-term debt

this this could be potentially a problem

so

uh so i i’m not making like a general

prediction i is it up or down i’m just i

think there’s a lot of

risks in the system

and

uh you know i i’d say we’re kind of more

like on a knife’s edge you could go

either way okay but i can’t really say

like it’s definitely gonna be one or the

other yeah yeah so when i think about

residential i got kind of several notes

that i think are pretty

i feel good about again my crystal ball

is as broken as everyone else’s

but here we go so first off i think wall

street or kind of cash buyers are a

bigger player in two years than they are

today

for example just the q3 numbers just

came out yesterday reported on real deal

uh i think it was 18.2 percent of

transactions about 90 000 or so in the

quarter were investors 77 of those were

cash buyers

and that’s up from a year ago 11 so

about a 50 move uh so i think investors

uh are a bigger part of it again the the

risk-adjusted return in single-family is

the highest of of any asset at least as

of this year so i think they’re bigger

next year i think that’s a safe bet i

think rates are higher

right this morning i think i saw them

they were at 3.27 uh i think they’re

higher two years from now i think

they’re over four

uh again third year onarak all of that

uh obviously if that is true i think

lower affordability i think

affordability is the biggest thing i

track in housing

affordability is already

reducing i think it continues to but

obviously affordability is also made up

of wages and wages are going up so it

won’t i don’t think affordability goes

down as most people think because

they’re all most people when they think

about affordability they look at price

and interest rate and they forget

wages and again i learned that by

studying the 70s

another thing is i think but in two

years we are going to see the average

new construction home be smaller

i think the land the era of the

mcmansions are over i think we’re going

to see

the average new home be smaller probably

by

10

again we we have um you know we need

more units

in some areas

i also think there’s some new technology

that maybe goes mainstream this is

probably my biggest reach i would feel

good about three or four years for this

one is it the 3d printed home is it the

tiny home is it the container home what

is it uh i think again uh there may be a

new it won’t always be stick build for

for single family homes and then the

final one

is something i don’t feel good about but

i do think it lands in two years and

that is the 40-year mortgage

is now a

a

legitimate option probably only for

owner ox i don’t believe it will be for

investors just yet they will stick them

with the 30-year they want to give the

owners a better chance and again if you

go out another 120 months makes the

payment lower and people buy on payment

not on price

uh so when i think about single family

that’s kind of my running list

you know i i mean it’s interesting you

say that about the 40-year mortgage

right because

i mean first of all it’ll be

self-defeating because then the price

will just go up because the payment goes

down but you know there are

at the height of the bubble in japan

people were taking 100-year mortgages

in switzerland it’s very like 80-year

mortgages are basically like the

standard from what i understand that one

of my best friends lives there

80-year mortgage which is just nuts

right oh yeah like you

you’re never going to pay that off yeah

and like no wonder the price of housing

is so steep in switzerland right so

um

but we could see it you know we could

see it coming here it’s just we’re just

just going to make the problem worse

worse yeah i do think in two years they

will keep it separate that’s why it’ll

only be for owner occupants they want to

give him a fighting chance and yadda

yadda yadda investors will still be

stuck with the 30 year but that won’t

last they’ll eventually give the 40 year

to investors but i don’t think that

happens in two years

also i mean a lot of investors will

lie i mean yeah of course

i’m gonna move into that yeah exactly i

mean it’s it’s hard for like you know

blackrock to lie about it but you know

they’re not getting a 30-year mortgage

at least not david yeah no yeah i mean

we could we could do it if probably get

away with it but uh

you know

it’s

i mean i think i think you’re right i

think i think the the smaller home thing

too i mean i think it’s really got to

happen but as we’ve talked about before

it’s really dependent on zoning right i

mean if we if you can’t get higher

densities then

it you’re not going to be able to build

those smaller homes right yeah it has to

change though yeah you’ve got to pay for

these big lots that adds to the price

you can’t you know it just it just

we just we have to get to you know

smaller lot sizes you know back back to

like you know two family houses and they

don’t even build those anymore do they

but that’s those

if you think about like what a great

innovation the two-family house was like

specifically as an owner occupied rental

to help you to help you

cover your you know i mean this is like

a really wonderful thing

and uh

it’s not not built anymore right so

you can get back to that that’s very

cool jonathan this has been fun to think

about again something that had not

crossed my mind so thank you for putting

it out on your facebook group how can

people find you and find the group yeah

so the group is called the multi-family

investment community so just search for

it on facebook and drop by and say hello

and uh also just giving a little heads

up that i do have a multi-family deal

i’m working on now if you are an

accredited investor uh you should reach

out to me to learn more you can get onto

my list by googling two bridges asset

management llc and fill out the investor

form and be in touch very cool thanks

john

yep

 

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