There was a total of 6 properties that traded in February 2023 consisting of $16.530M, the median price per unit was $221k. The average CAP rate of these sales was 4.52%. It’s important to note that most of the transactions were value add deals with significant upside after repositioning the property and were priced accordingly. Download the comps below!
Market velocity is experiencing headwinds due to rising interest rates and the gap in pricing expectations between sellers, and buyers looking for attractive returns. This is evident by the 23.6% variance between the median price per unit of deals closed, versus properties still listed for sale. February 2023’s volume was down 10.98% ($2.038M) compared to February 2022’s volume. There was also 14.29% less transactions in the same month of the prior year.
Inventory is continuing to accumulate with a total of 41 properties actively on the market. The average days on market is 73 days and the longest listed property has been sitting for 267 days.
In March, the FED continued to raise rates by 0.25% as expected, following the news of the collapse of both Silicon Valley and Signature Banks. Is a potential banking crisis on the horizon and how will this impact commercial real estate? Fortunately, Hawaii banks are well diversified and not heavily exposed to tech start-ups and crypto like SVB and SB were. However, nationally there are rumblings of CRE loans that are maturing in the near term that are secured by riskier asset types. Something worth keeping an eye on in the future.
Will we see the Fed cut rates in 2023?
Vote below:
Yes
No
Many of the multifamily property owners that I’ve been meeting with keep raising the issue of having to address deferred maintenance or large capital expense projects in the near term, but don’t necessarily have the funds available to tackle the projects. By establishing a reserve fund, owners can avoid disruption in revenue and maintain and operate the property at a healthy level. A good rule of thumb for establishing a reserve fund is to set aside anywhere from 5-10% of gross revenue on an annual basis.
Reserve funds are typically used for the following projects:
- Roof replacement
- Plumbing re-piping
- Spalling and concrete work
- Repaving parking lots, driveways, and sidewalks
- Repainting common areas
Artificial Intelligence is already changing the landscape for real estate investing, especially on the operations and systems side of the house. We'll share more on how you can benefit from "AI" in later updates.
Here's a fun Haiku written by Chat GPT:
Multifamily dreams,
Cash flow streams through each unit,
Investing in growth.
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