Everyone is asking, “what is going on with the market”? I’m not going to lie, I was quite nervous about the market at the end of last week. Broker preview had a totally packed line-up, including three in my neighborhood with the expectation of more to come. My neighborhood typically has no more than 2 properties available at one time. Having more than that and all listed within a couple days of one another, that definitely shook me a bit. The follow up? I saw several fantastic apartment complexes that I would personally love to have in the portfolio recently listed. They were fewer than 16 units so no need for an onsite property manager, but more than 8 units that can justify paying for commercial financing and all filling that void of 1 and 2 bedroom inventory for people just looking for that little slice of beach life. The small apartment buildings were all being offered at very low cap rates, but as far as products go, I’m all over it like my dog Max is for dinner time. I saw my inbox blowing up with all of this information and my mind went down the dark rabbit hole.
I called boss man, aka my dad, to get his feedback because he’s a financial advisor who has successfully timed the market in 07/08 and 10/11. In a nervous panic I called and talked to him about what I had seen just that morning. I added that about 10 days prior, we had a corporate meeting about new legislation surrounding Additional Dwelling Units and the structure that Newport Beach will have in comparison to Costa Mesa and Laguna Beach. He calmly expressed that he wasn’t worried.
He said that we’re watching investors back off a bit. In the apartment building scenarios, we’re watching investors trying to double their money and sell at low cap rates. It doesn’t necessarily mean that the investors will sell their buildings. However, they’re putting their properties out there to be ready for the taking if someone just really wants/needs a building.
Oddly enough, after previewing all of the properties in my neighborhood that were listed, I saw a pattern. It was clear that all of the sellers appeared to be young couples that were looking to capitalize on the upswing in the market and upgrade into something else. They were basically the equivalent to the apartment building owners: opportunistic. It’s simple, we’re just looking at opportunistic sellers as opposed to highly motivated sellers.
Even so, this still sounds nerve racking. However, if I consider how many buyers I have in comparison to sellers, this is a positive. Just the couple weeks prior, I was talking about how low inventory was and the hopelessness of trying to help everyone make smart purchases when inventory was so low. Now, it feels like we’re moving to a healthier market consisting of matching square pegs with square holes instead of a square peg with a round hole. This should also mean that we’re moving to a much more predictable marketplace, which is a powerful tool for everyone involved. Find that spring in your step and keep going. The weather maybe cold, but it’s a sunshiny day!!
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