Planning for 2023 as Rates Rise and Rents Stagnate
Market changes call for investment recalibrations next year. Planning is mandatory even if fundamentals are strong and interest rates not historically shocking.
NEW YORK – MZ Capital Partners’ Michael H. Zaransky believes that rent growth will soon enter a cycle more like pre-pandemic periods. That means that uncertainty will be manageable but require certain adjustments and recalibration.
He advises real estate professionals to remain calm, secure in the knowledge that the sector’s fundamentals remain strong. If that’s challenging, he suggests that agents keep things in perspective by remembering that the real estate business typically experiences economical ebbs and flows.
The interest rate for a multifamily acquisition is hovering around 5%, for example, which some people may see as elevated compared to when it was roughly 3%.
“I remember when I got a commitment from the bank years ago, and they agreed to provide us with debt and a 7% interest rate,” says Zaransky. “I was doing high-fives, thinking, ‘It’s unbelievable how cheap this is!”
He says it’s possible to withstand today’s challenges too. Multifamily real estate investors just need to develop their plans with full awareness, because they will most probably need to readjust those plans in the weeks and months ahead.
He adds another positive note: The past year has witnessed double-digit percentage rent growth.
Zaransky believes that with everything going on, rent growth will likely be closer to 3% or 4% percent in most markets, which should have a significant effect in terms of where agents think they will be next year.
Source: Inman (11/11/22) Zaransky, Michael
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