What You Need to Know About Multifamily - IMN's 6th Annual Middle-Market Multifamily Forum (Northeast)

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What we learned from the New York Middle-Market Multifamily Forum hosted on October 10, 2023.

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MULTIFAMILY ECONOMIC OVERVIEW

When asked “are we at the bottom or still falling?”, responses varied from falling for another 6 months, to ‘36 months of real tight problems’. Here’s why:

• Mounting pressure on banks with the rise of interest rates, potential Black Swan event including deglobalization and next year’s presidential election, regulatory markets, still feeling the effects of the COVID exodus alongside little vacancy in NYC, economy hit hard resulting in job losses, inflation, labor and union costs up across the board, high insurance: retail precautions due to theft and riots, alongside climate change and places vulnerable to bad weather, such as Florida, construction costs have stayed elevated

ON THE BRIGHT SIDE:

Panel feedback also included that families are doing more private money lending, consumers are still strong, and with the stock market still up people are feeling okay. A suggested solution was that the market will need to recognize these issues and prices it in. When asked where will interest rates be 1 year from today, panelist response varied from lower, the same, and higher. We’ll have to wait and see.

URBANISATION IS BACK

And it’s back big time. With more people working from home, they want their area to be ‘entertainment destinations’ so that when the laptop shuts they have plenty of things to do. This includes having somewhere to take the kids. “We’re looking to place-make more than ever before”.


MANAGEMENT

The In-house route or 3rd Party resourcing? There were pros and cons put forward for both sides. While we heard “it’s your responsibility to hire 3rd party”, we also heard “people don’t care as much if it’s not their property.” Insights included:

3RD PARTY:

- Enables scalability and streamlines workflow, brings in staff experienced with situations you’re unfamiliar with and trained at a higher level, creates wider market expertise

IN HOUSE:

- More control and oversight at property level, self-manage: more transparency, better communication and aligned vision, cheaper (though an internal investment can at times end up more expensive), alignment of interest, access to information

TECHNOLOGY:

- Better tracking, expedited workflows, scalability, cheaper in the long term, allows data informed strategy and decision making

While keeping it in-house is ideal, “there’s a lot of turns that can happen so you have to figure out other solutions.” With that in mind, “outsourcings really helped us”, with a multitude of outsourcing processes including: maintenance, payroll, IT, PO Box, book-keeping, tax accounting, HR.

SUGGESTED QUESTIONS TO CONSIDER:

- Do you want to make the investment in time and money?

- Which portfolios suit this and which don’t?

- How long do you want to be in those markets?

Be it internally or outsourced, ‘boots on the ground’ is essential: “visiting properties on a weekly basis makes a real difference, it’s real dollars.”

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