Today.
I want to talk about, you know, are we in a buyer's or a seller's market?
This the reason why I want to, Charlie, on
this one is because, you know, you started with this company,
you had 18,000 units and you had 50,000 when you finished.
And, you know, and so you had an opportunity
to look at buy due diligence, a source meet with brokers, multiple markets,
a tremendous amount of experience over the last five or six years,
you know,
And so you're going to have some pretty good optics on, you know, trends, Right?
You saw the trends go up.
You know, you've seen prices go down.
You even seen markets go up and down.
Now we've seen these interest rate increases.
So where are we today and where do you think we're headed?
We're actually starting into the beginning phases of I would consider a buyer's
market at this point.
If you as a seller for me, if you are you don't know where your legs are yet
and the people are going to be selling are going to be long term
owners to have a really low basis and they're nervous about the future.
And so they just want to take some chips off the table.
So as long as you're buying what it is, you're hitting your metrics
and you have a long term approach, I don't think this is
you're not in the burn and turn
phase of the market.
You're in the eye.
Hey, I have an opportunity to go up against a lot less people.
Institutions are out of the picture right now
until they clear their sheets.
And so you have an opportunity to go in and conservatively buy
something long term.
I think it's a good place to be.
I think the sellers I think the real big kicker, IRR, is
the short term stuff is going to come once you start getting the sellers
that are selling because they have to sell, right?
They are way up, you know, their way and all over their skis and they've got
they can't afford it. It's about to go back to the bank.
They're trying to just salvage their investors money and not default on a loan.
That's where you're going to get your big like,
hey, I could buy this, turn this around and get rid of it.
But I think it's a great opportunity
to buy the next 6 to 12 months if you're a long term owner.
Yeah, I would say that most sellers have to sell
or like you said, they have a lot of equity.
Right.
But if you don't have to for any reason, you don't have any pressure from your dad
or your equity, there would be no reason to list your property.
None right now.
Is that right? I agree.
I don't
I don't There's no reason to be listed unless the one of those two options,
because the the long term prognosis based on,
you know, the way the economy's been run by multiple administrations.
Let's just pick on the current one.
Yeah, you know, it it, it, it it looks good.
Where undersupplied you know, for housing,
you know, it's been corrected because of the interest rates.
We have high inflation.
You know, we don't need to go down that road.
But the point is, is it looks to me like interest rates are going to continue
to tick up for a little while.
And as long as they do, it's just going to
it's just going to let more air out of the asset bubble, Right?
Is that what you think?
I agree. Yeah.
But I don't I think the the brunt of it has happened in terms of the asset bubble.
I don't think we're going to see that we're down 25 some markets, 30, 35%.
I don't think there's another one of those coming.
So I think, again, if you're trying to time the market,
you're always going to be in trouble, right?
You just. Yeah, and we're talking about multifamily.
Yeah, that's right. Yeah. Just, you know what's just cool. Yeah. Yeah.
If we're in a nine inning game, it feels to me like we're somewhere
in between the second and the third inning. Yeah. Okay.
Yeah, Yeah. I think those are rough. First and second.
Yeah. Inning.
But I don't think
Yeah, we're talking about end of the game is when we start appreciating.
Yeah. I think we're, I think. Yeah. Third, fourth inning.
Yeah. Okay good.
But a really rough You got shelf you seven.
Yeah we got it got shelter
but now that like you know we were up obviously we're way behind right down.
Yeah.
If you're a seller here you're down 15 to 1.
Yeah.
You know, or you know what to be
and you're coming out and you're trying to figure out what to do.
And but, but I agree.
Cap rates are up almost a point, you know, which means the values are down,
what, 20%, I guess, at least on multifamily.
And then we're also starting to see residential
go down all over the place, right?
So we're not far off and we're in the third inning.
You say three, four, I say two, three.
So let's just settle in on three.
What do you think's going to happen in, say, innings four or five?
Six, you're going to have to
think is going to be two things are going to happen.
One, I think you're going to see a lot of distressed product come out.
A lot of guys who bought in rougher parts of town.
Yeah, rougher deal, highly leveraged, seasonal.
Yeah. And this is again, just multifamily
and they are
going to be in a position which when their debt comes to maturity,
they're in no way, shape or form going to even be to get out of that.
So I think you're going to get that.
But I don't know there's how much of a market there's going to be. Yeah.
Which is also a really interesting, I don't know,
mean buyers are going to have that are really excited
to jump back in the late 1970s killer deals
after what we just went through.
And I think the second thing is going to be the flight to
right where I think you want to be in a buyer's y.
I kind of think this is a good buyer's market.
If you're going to go to the flight of flight to quality
is there's no institutional in the game right now.
They have to write off all their losses, right?
So they're all kind of figure out what they're going to write it off, too.
And once they clean their books up, I just feel like they're going to
we have so much capital still deploy and move.
I think once they can kind of write off their losses,
they're going to be back to having an appetite again
and they're going have an appetite for quality.
And so I think if you can go in and get into some really good stuff right now,
I think that market is by fifth, sixth, seventh inning is going to be the stuff
that starts to turn and start looking like it's going to get to the end of the game
for them sooner than the tougher, located, tougher products.
I think they're they might be in for a much longer game.
I completely agree with you.
I think one of the very interesting thing is that you skipped over more.
You think about where you said I guess I want to bring some attention
to is when Charlie says that institutions are out of the market.
What that means is that big Wall Street, big, big money is out.
Out, Right. That's significant. Yeah.
If you just think of that, like, why would that be?
Why would Wall Street be out of the multifamily market right now?
Right. Like, well, what would you say?
Well,
I'm have a really simplistic answer to it.
I think it is against that They they're all on a big corporation
in which everyone has a job
and then somebody has a boss and they have someone to answer to and no.
But when in uncertainty, nobody wants to be the guy
who jumped off the diving board first with an asset.
Explain to the five people that oversee them or the 55 people that oversee them,
the big corporations. Those phone calls are always great.
There's always 40 people on a phone call.
Yeah, for a job they should buy, take two.
So everybody is just afraid to be that guy inside the corp
that calls it first that there's a ton of groupthink that goes into that.
And so I think that's why they're out, is there's just so much uncertainty.
I don't want to be the company that called it
that we're actually in the eighth inning when we weren't correct.
Yeah, I agree.
And not to mention the fact that if there it's also short term money.
So, you know, what that means is if I
if Charlie's let's say Goldman and I get, you know, money from Goldman
and I buy something, they want it back, what, three or four years?
Yeah, right. Okay.
So what's just happened?
Values have gone down.
If they were when they were in the game one year ago, their values are down 20%.
Correct? Right. So they're looking at that. Right.
They're looking at, jeez, if I bought somebody 100 million, it's now worth 80.
Yeah, right.
That's today's value.
So they've lost 20 million in value.
What what the what the GP may not know is really.
That's all of them.
Yeah, exactly.
It's the GP is the one who doesn't get the money,
the debt and the equity is still probably in the money clause.
Yeah. Right, right. Yeah. There might be a little skinny so.
So they've just had this cap rate increase.
Interest rates have increased
even though their cost of money is a lot less than ours.
But there's, they're stepping back and say
we're going to see how far this knife falls. Right.
Yeah. When you agree with. I agree.