More Big & Smart Money Piling In Real Estate
More big money and more ‘smart’ money is being plowed into the US real estate market. Why are they flooding the market with their capital? What does it mean for other investors?
The Smart Money Is Flowing Into Real Estate
It’s no secret that big funds and billionaire investors have been allocating more of their portfolios to alternative assets including real estate over the past few years. A while back we covered how multi-billion dollar Ivy League endowment funds like Yale, Stanford, and Harvard were some of the leaders in doing that.
Now huge pension funds are funneling much more of their funds to this sector too. They used to be big players in the office market. Now they are trending towards rental homes. In one recent deal a pension fund bought out an entire new home subdivision at a 50% premium.
Why are they doing it?
Multifamily has emerged as being more stable than office, industrial and retail.
Real estate is also seen as an essential hedge against inflation and volatility bubbles. Not just against the public stock market, but now against big positions in cryptocurrencies, which Coinbase has warned is likely to suffer a deep crash this year.
Funds also need the income that rental real estate can offer, even if they are happy paying top dollar and accepting marginal yields.
International analysts also predict the US will lead most of the world in economic growth by far this year, which is going to bring back a lot of foreign investment into this space.
Expectations For Multifamily In 2021 & Beyond
Analysts are very bullish on the outlook for multifamily.
- CBRE predicts MF investment will rise 33% this year
- The Mortgage Bankers Association forecasts a new upward trend in MF originations
- Interest rates remain low
- Prices continue to rise
- Fannie Mae predicts vacancy rates will plummet to new lows of under 5%
The Opportunities
The biggest funds have to invest in bulk in ready to go deals. This creates a lot of opportunity for other investors and funds to become their top suppliers.
There are good opportunities for acquiring multifamily for repositioning, value add, lease up, and reselling in bulk to these supersized funds. Or for holding and letting them drive up the value of your assets. The sooner you get in and benefit from this lift the better.
