Why Should I Sell My Multifamily Property?

Why should I Sell My Multifamily Property?

There are a number of reasons why people decide to sell their multifamily property, but most can be categorized into three groups: Problems, Opportunities, and Changes.

With this decision though comes the consideration of capital gains tax and how to ensure you are getting the most for the sale of your property.

There are several reasons why people do sell:

Problems:             

• Management
• Vacancy
• Maintenance
• Stress
• Health
• Debt
• Neighborhood
• Interest Rates

Opportunities: 

• Strong Market Values
• Alternate Investment
• End of the Hold Period
• Tax Savings

Changes:               

• Divorce
• Death
• Retirement
• Partnership Split
• Relocation
• Consolidation
• Diversification

What do I do with the sales proceeds? I don't want to pay Capital Gains Tax!

There are several options for sellers to defer or minimize capital gains taxes:

• 1031 Exchange
• Delaware Statutory Trust/Deferred Sales Trust  (DST)
• Tenancy in Common Investment (TIC)
• Installment Sale

How do I know I am getting the most money for my property?

We not only market properties for sale. We make a market for properties we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites with direct outreach to our investor database and an orchestrated competitive bidding process that yields higher sales prices. 

What is my property worth?

Contact Us to discuss what information is needed to complete a Complimentary Commercial Broker Opinion of Value (BOV). 

I’m not interested in selling at this time.

This is understandable as only about 5% of the market trades in any given year. We are also happy discuss any purchase or refinance interests and recommend some physical and operational changes you can make to add value to your property you will appreciate when you eventually sell.  

 

Author:
Randolph Taylor MBA, CCIM
(630) 474-6441
rtaylor@creconsult.net

Randolph Taylor MBA, CCIM is a Multifamily Investment Sales Broker in the National Multifamily Division with eXp Commercial. Randolph focuses on the Listing and Sale of Multifamily Properties in the Greater Chicago area and Suburbs. Randolph has over 24 years of Commercial Real Estate experience including Corporate Real Estate, Asset Management, and Commercial Real Estate Brokerage. Randolph’s broad knowledge of the Commercial Real Estate Industry, financial analysis, marketing, and negotiating skills uniquely position him to provide a superior level of service to his clients.

https://www.creconsult.net/market-trends/why-should-i-sell-my-multifamily-property/

eXp Commercial Offering Free Training & Certification

Training and education are core offerings at eXp Realty® and eXp Commercial® is adding to the goodness by offering several opportunities for all agents — whether you’re with eXp Realty or not — to take part in commercial real estate training during the week of Dec. 6-10.

Free, 3-Day Course to Get Trained and Certified in Commercial Real Estate

The training program, “An Introduction to Commercial Real Estate,” is a full, three-day program being held Dec. 6-8 and will be facilitated by Michael Simpson of the National Commercial Real Estate Association (NCREA). It’s free and will be held virtually in the eXp Commercial Campus (download directions here).

> Register now for this FREE training

“There has always been a lack of education and training when it comes to commercial real estate,” said Stephanie Gilezan, Director of eXp Commercial Brokerage Operations. “Pre-licensing and continuing education barely touch on commercial real estate. With the lack of training, it has always been difficult for commercial agents and brokers to be successful in the commercial real estate space. At eXp Commercial, we want to put education and training at the forefront so all licensees have the training necessary to know the business but to also be successful in their commercial real estate career.”

Monday-Wednesday Dec. 6-8: “An Introduction to Commercial Real Estate”

• What: “An Introduction to Commercial Real Estate” training program
• When: Monday through Wednesday, Dec. 6-8 starting at 7 a.m. PT each day
• Where: eXp Commercial Campus Auditorium. (Download here.) For non-eXp agents, upon registration, information will be provided on how to access the eXp Commercial Campus.
• Who can attend: Licensed real estate agents who are interested in learning more about commercial real estate
• Cost: Free! (a $600 value)
• Agenda: See the curriculum here (All times are PT)
• Certification: Agents who attend classes Monday through Wednesday, Dec. 6-8 and do the homework and pass the test will be awarded a certificate verifying this accomplishment.

Getting insight and training into commercial real estate is not easily accessible and it can be costly. This 3-day course is estimated to be valued at $600, but eXp Commercial is offering it for free. eXp is committed to educating all agents in residential real estate, as well as commercial. This class is ideal for residential real estate agents who want to learn more about commercial real estate and add another tool to their arsenal. Don’t miss this free opportunity!

Thursday, Dec. 9: Commercial Real Estate Symposium

For more advanced commercial real estate agents, eXp Commercial is hosting the Commercial Real Estate Symposium on Thursday, Dec. 9, 2021, in the virtual eXp Commercial Campus. Hear from the industry’s top leaders, national economists and thriving entrepreneurs on the future of commercial real estate.

The Commercial Real Estate Symposium is open to commercial real estate licensees and will feature networking opportunities, breakout sessions, and giveaways.

KC Conway, the principal, and founder of Red Shoe Economics will be the main speaker and will address the future of commercial real estate from an economist’s perspective.

There will also be panels featuring leaders from the Society of Industrial and Office Realtors® (SIOR), Certified Commercial Investment Member (CCIM), and the Institute of Real Estate Management (IREM) on topics such as where the commercial real estate opportunities are, adaptive reuse, and why inclusion is important for the industry.

Friday, Dec. 10: Additional Networking

To offer an opportunity for additional networking, Friday, Dec. 10 will be a day for people to visit the eXp Commercial Expo Hall and network. This is a casual event to provide additional time for attendees to learn more about training and eXp Commercial.

Interested in a Career in Commercial Real Estate?

eXp Commercial is one of the fastest-growing real estate brokerages in the world, with a presence in 11 countries: the United States, Brazil, Australia, Canada, France, India, Mexico, Portugal, South Africa, Puerto Rico, and the United Kingdom.

With over 83K Commercial and Residential Agents around the world all connected and collaborating through eXp World  – a virtual platform created by eXp’s Virbela technologies, eXp Commercial experts help their clients get the best out of their investments by providing commercial real estate buying, selling and leasing services across all asset types and specialties. 

Join eXp Commercial

 

 

https://www.creconsult.net/market-trends/exp-commercial-offering-free-training-certification/

Explaining the Breakdown of One Dollar of Rent

With so much discussion around rent payments and the prevailing misconception that rental housing owners enjoy large margins, the National Apartment Association (NAA) has released an explanation of the breakdown of one dollar of rent for 2022.

Because education is an effective way to counter harmful public policy and negative industry stereotypes, NAA offers this explanatory infographic breaking down a dollar of rent into its component parts.

The apartment industry must help society understand the benefits of rent payments for all Americans, whether or not they reside in rental housing.

From supporting 17.5 million jobs to the dollars reinvested into apartment communities to ensure quality living for more than 40 million residents, and through paying property taxes that finance schools, emergency services and other local needs to investor returns that include public pensions and 401(k)s, rent payment is much more important than one might otherwise realize.

 

Source: Explaining the Breakdown of One Dollar of Rent | National Apartment Association

https://www.creconsult.net/market-trends/explaining-the-breakdown-of-one-dollar-of-rent-national-apartment-association/

10 Common Themes Amongst Apartment REITs In 3Q22

10 Common Themes Amongst Apartment REITs In 3Q22

As fall earnings season comes to a close, we take a look at the 10 themes apartment REITs and REIT analysts discussed. From economic pressures to resident retention, here are the themes that illustrate how apartment performance has changed, including a few refreshed themes from the fall 2021 earnings season, and what it means as we head into 2023.

1. New and renewal lease rent growth is beginning to invert. As we head into the slower winter leasing season, new lease rent change has moderated considerably (as is consistent with RealPage Market Analytics data) while renewal lease rent change has continued to increase leading to lower loss to lease heading into 2023

2. Resident retention remains elevated. As leasing traffic has cooled and we return to more normal seasonal patterns, more residents are choosing to renew their leases, bolstering back-end occupancy and allowing for stronger rent rolls heading into the slow winter leasing season.

3. Move-outs to home purchases are down year-over-year. The Fed’s interest rate increases have pushed 30-year mortgage rates above 7%. Consequently, would-be first-time home buyers have pivoted, keeping many in the renter pool and bolstering resident retention rates.

4. Concessions are back… sort of. Overall concession value of about 2-4 weeks of free rent has remained fairly consistent throughout 2022. However, REIT executives reported strategic use of concessions to move certain unit types, compete with nearby lease-up properties, or as a marketing tool to boost front-end leasing.

5. Resident incomes are up. REIT executives, echoing our own data and analysis, confirm that their resident incomes are up, and despite increasing rents, that rent-to-income ratio remains very healthy in the low 20% range. This is well below the long-held 33% affordability threshold and illustrates that market-rate renters are keeping pace with market-rate rent increases.

6. Resident payments remain healthy. Resident payments and rental collections maintain strength. REITs are not seeing an increase in bad debt or delinquency while working through their backlogs and COVID relief money from the beginning of the pandemic.

7. No signs of recoupling… yet. With resident incomes keeping pace with rent increases, REIT executives have not yet noticed any signs of a “flight to affordability” via recoupling or doubling up. REIT executives will certainly keep a keen eye on any movement, but nothing has materialized on this front yet.

8. Expenses are up across the board. REITs noted that the largest expense item – property taxes – remains elevated heading into 2023. Large increases in utilities due to energy prices have emerged as inflationary pressure keeps maintenance, labor, and material costs stubbornly high. All said REITs anticipate elevated expenses to persist into 2023.

9. Cap rates are expanding. How much and to what degree is hard to tell as regional variations and slowing transaction volume have clouded the overall picture. Many REITs have slowed their own activity, pausing acquisition and disposition plans to take a wait-and-see approach, while the Fed continues its plans to fight inflation via prolonged interest rate hikes.

10. Slowing development starts in 2023. With uncertainty in the capital markets environment, many REITs are slowing or pausing their development pipelines in 2023, as development yields clash in a tug-of-war situation with cap rates and rising interest rates. The staggering volume of units under construction across the U.S. – over 900,000 at the end of 3rd quarter of 2022 – has likely peaked for the near term.

 

Source: 10 Common Themes Amongst Apartment REITs In 3Q22

https://www.creconsult.net/market-trends/10-common-themes-amongst-apartment-reits-in-3q22/

The Fed Will Slow Rate Hikes As Risks for a Financial Accident Grow

• The Fed will be forced to slow its pace of rate hikes as volatility ramps up, Charles Schwab said.
• Analysts pointed to strains in bond and currency markets, which stem from the Fed's aggressive hikes this year.
• That means risks are not only rising for a recession, but for a financial accident as well, Schwab warned.

The Fed will be forced to slow its pace of rate hikes as it risks not only sending the economy into a recession but causing a financial accident as well, according to analysts from Charles Schwab.

The central bank issued three consecutive 75-basis-point rate hikes this summer in response to growing inflation, which hit a 41-year high in June, with expectations now for the Fed to keep tightening until the policy rate hits 4.5% to 4.75%.

Markets are expecting another 75-basis-point increase in November, but the central bank could soon be forced to slow its pace of tightening, Charles Schwab analysts said in a note on Friday, pointing to growing volatility stemming from the hikes issued so far.

"In recent weeks the possibility of a more serious accident has emerged – the risk that the Fed's aggressive tightening will not just tip the US into recession, but potentially de-stabilize the financial system in the process," analysts said.

The bank pointed to choppy waters in government bonds, in which volatility is currently measured at 153, according to Merrill Option Volatility Estimate. That's nearing levels seen in March 2020, when the Fed began injecting liquidity into the financial system to quell markets during the pandemic.

The US dollar's rally this year is also ramping up volatility in markets outside the US. The Fed's rate hikes have an outsized impact on the global economy since most trade and debt are denominated in dollars.

Because a strong dollar makes imports less expensive, rate hikes are effectively exporting inflation to other countries, analysts said.

In addition, a rapidly rising dollar increases borrowing costs, especially in emerging markets, so servicing loans or debt with a depreciating currency raises the risk of defaults, Schwab warned.

"Volatility has spiked up in a range of markets from currencies to bonds, raising concerns about the ability of the global economy to cope with sharply higher US interest rates," the bank added. "While we don't expect the Fed to stop hiking rates, we believe a good case can be made that market pressures may force it to slow the pace."

 

Source: The Fed Will Slow Rate Hikes As Risks for a Financial Accident Grow

https://www.creconsult.net/market-trends/the-fed-will-slow-rate-hikes-as-risks-for-a-financial-accident-grow/

Cap rates jump 72 basis points in 6 months

Dive Brief:

• Data is backing up what many multifamily buyers and sellers already know —cap rates are rising in apartments around the country.
• A new report from CBRE says that going-in cap rates rose 33 basis points to 4.09% in the third quarter. In the second quarter, they jumped 39 bps (their biggest increase in a quarter ever) — marking a 72 bps increase over six months. Still, they are below their fourth-quarter 2019 level of 4.16%.
• Exit cap rates, or the rate used to estimate a property’s value at the end of the holding period, increased 21 bps in the third quarter versus 30 in the second quarter. However, the current 4.63% exit cap rate sits below pre-pandemic levels. Internal rate of return targets passed the pre-pandemic average, rising 35 basis points to 6.39%.

Dive Insight:

Investors are also becoming more pessimistic about rent growth as demand slows. They underwrote 3.6% annual rent growth over the next three years, compared to a 4.3% forecast in the first quarter. From 2014 to 2019, they underwrote 3.1% rent growth on average, according to CBRE.

This more tepid environment could attract buyers who are conservative when projecting rent growth.

“We’ve said, ‘If a deal doesn’t work with 3% rent growth, we’re not buying,’” said Stuart Zook, chief investment officer for Coconut Grove, Florida-based Monument Capital Management. “We're not assuming that we're going to get 5% on renewals. If we can, great.”

While gateway markets suffered during the pandemic, CBRE says investors are now optimistic about rent growth in those metros. Six months ago, anticipated gateway rent growth sat below other markets.

In Dallas, Philadelphia, and New York City, going-in cap rates were flat. In all other markets, they rose. In gateway markets, cap rates have only increased 58 basis points in six months — below the 82 average for other metros.

With this uncertain market, Matt Vance, America's head of multifamily research for CBRE, commented in the report that apartment investors are being selective. “While a bid/ask price gap exists for many assets, transactions are continuing to close,” he said. “This reflects buyers’ long-term confidence and sellers’ willingness to lower pricing modestly in light of the significant embedded gains in assets purchased over the past several years.”

But that isn’t universal. Some observers have seen transactions fall because buyers and sellers still haven’t totally come together on pricing.

“Price discovery is taking place right now,” Manus Clancy, senior managing director of applied data, research, and pricing for data and analytics firm Trepp, told Multifamily Dive. “People are trying to figure out where the market is.”

In some markets, underwriting apartment deals are more complicated than in others.

“In the Seattle region, it has been difficult for us to make it work from an underwriting standpoint,” Derek Graham, president, and principal of Hermosa Beach, California-based Odyssey Properties Group, told Multifamily Dive in August. “And it’s largely because the pricing hasn’t shifted very much — the same as in all these other markets. Sellers are resistant to adjusting their pricing and I don’t blame them.”

 

Source: Cap rates jump 72 basis points in 6 months

https://www.creconsult.net/market-trends/cap-rates-jump-72-basis-points-in-6-months/

Commercial Real Estate Symposium October 25 2022 7 a.m. – 3 p.m. PT

Commercial Real Estate Symposium
October 25, 2022
7 a.m. – 3 p.m. PT

Hear from the industry’s top leaders, national economists and thriving entrepreneurs on the future of commercial real estate.

Register now for this FREE event.

Agenda

*All times are listed in PT.

7 a.m. 
Welcoming Remarks 
James Huang, President, eXp Commercial

7:15 a.m. 
Entrepreneurship and Small Business Financing 
Charles Rho, President, VelocitySBA

8:00 a.m. 
Using AR/VR Technology to Attract Investors to Your Property
Matt Bonds, U.S. President, RealSee

8:30 a.m. 
The Future of Technology in Commercial Real Estate
Duke Long, Second Century Ventures
Obie Walli, CEO, Dealius
Ember Erickson, Co-Founder and Head of Revenue, Biproxi

9:00 a.m. 
Inclusion in Commercial Real Estate
Jessica Nieto, ONEeXp
Donnel Williams, President, Black Real Estate Professionals Alliance
Desiree Patno, CEO, NAWRB

9:30 a.m. 
Comparing Business & Real Estate Brokerage
Kylene Golubski, Executive Director, IBBA
Neal Isaacs, VR Business Brokers

10:00 a.m. 
Corporate Services, RELO and Commercial REO
Dawn Conciatori, Vice President Referral Generation, eXp Realty
Eric Powers, CEO 7LCRE
Fred Schmidt, Managing Partner, Valuation Alliance

10:30 a.m. 
State of the Commercial Real Estate Industry
KC Conway, Founder and President, Red Shoe Economics 

11:30 a.m. 
Global Opportunities in Commercial Real Estate
Meghan Kelley, VP Global Operations, eXp Realty
Renata Sujto, Broker of Record – International, eXp Realty
Samuel Caux, Managing Broker, France, eXp Global
Andrew Thompson, Designated Managing Broker, South Africa, eXp Global

12:00 p.m. 
The Coming Digital Asset Disruption and How it Impacts Commercial Real Estate
Olivier Manuel, President, Rich Devices

12:30 p.m. 
Vylla Title
John Tavarez

1:00 p.m. 
JTC Americas
Justin Amos

1:30 p.m. 
O’Connor Tax Reduction Experts
Shalonda Marshall

2:00 p.m. 
TransGlobal
Philip Hu

2:30 p.m. 
CommLoan 
Jonathan Mangiapane

https://www.creconsult.net/market-trends/commercial-real-estate-symposium-october-25-2022-7-a-m-3-p-m-pt/