But i have friends that send me these kinds of things so if you guys can see Real estate strategies that um you know that’s an article that just came out on bank of America so yes the answer is that uh the lenders are um doing this now yeah absolutely um it wasn’t that i wasn’t paying attention well you know what it looks like to
everyone when you don’t announce what you’re doing sorry so anyways um so let’s hop into our questions for the inner circle so ken’s innercircle.com is where you can sign up we answer all your questions we have a book club starting at the end of the month we have happy hours it’s an awesome space.
it’s 30 bucks a month so go to ken’s innercircle.com to sign up so chad is the first question we have when analyzing a market to determine what rents can be sustained should i be looking at the average or medium income for the area to see if it falls within a certain percent of the annual rents paid yeah it’s a good question so that is you definitely need to do that to start but so my experience has been that every single rental community or house or four plex or aplex or whatever you want to call it.
Real estate strategies for correction price
It is very different from even the one next door or a block over so there are different nuances within a square block so something might be built in the 2000s versus the 90s versus the 60s it might be flat roofs two-story walk-up for example or single level some have garages some don’t some have washers and dryers some don’t some are renovated some don’t so you have to look at the whole picture uh also size and square footage.
So um you might have a 800 square foot two bedroom or you might have an 1100 square foot two bedroom so you know all of those things have to do with the rental price for your particular unit the the right way to do it in my opinion would be to uh sounds to me like it’s confusing and it is confusing is to is to engage a property manager in that location and ask them um and um also you know the history of whatever you’re buying or whatever you’ve done um is important but if there’s something very similar to you in your market.
Then that is your best comp but you have to you know drill down to make sure that yeah and as far as he was asking also about live events limitless is going to be next june 15th through the 17th here in scottsdale so we’ll have more info on that yeah yep yeah that’s going to be a good one we expect 2 000 people to that one so our next question comes from st and I love the initials very like mysterious i recently read an article from the economist jay parsons stating that the phoenix multi-family market is decelerating very quickly up until a couple months ago.
People thought the phoenix market was very strong but that seems to have changed recently do you agree and if so what will happen with the multi-family investments so i know jay well um so thank you for this um st there’s a couple reasons you know you gotta the answer is are multi-family values going down and the answer is yes but from a performance standpoint you have to look at the deeper question.
So um you know is did rent growth go from 18 or 19 to 10 yes is 10 still very good yes you know what i mean so you have to put it all into perspective so from an operator standpoint our occupancies are very high and our rent growth is still very robust and we are definitely not seeing 20 rent growth like a lot of markets experience which is actually good if if you know historically as long as i’ve been in this industry.
We typically budget three percent rent growth you know we haven’t seen those days for a long time so i consider it to be three to four percent rent growth good unfortunately we have these inflation issues and all these other things happening at the same time so from an operations standpoint i’m not really seeing any difference in our net operating income but what i am seeing a difference in is the mortgage payment.
Mortgage Payment
Because if somebody has a what’s a floating debt or bridge debt then of course their cash flows less their mortgage payment goes up and let’s just say noi is the same our net operating income is the same if the mortgage payment went up then your cash flow is down so the people that are exposed in the multifamily space are the ones without fixed rate debt okay and so the overwhelming majority of our deals are fixed rate debt.
So you know that’s the thing you want to watch and because of that interest rate increases and the mortgage payment increases that is what’s happening is the sellers are having to take less for their property just because the buyers are trying to solve to now the new cash flow numbers uh because of the high debt yeah multi-family is not an emotional buy it’s very much math.
It is um definitely definitely laura from the inner circle wants to know what do you think about buying new builds and outlying areas like coolidge maricopa florence builders are getting giving a lot of incentives right now and it seems like an easier way to start acquiring property and for those that aren’t familiar with arizona it’s kind of about an hour to an hour and a half outside of the the city center.
Yeah well it’s a great question actually this is a very insightful question first of all i would be very careful on those right now for a number of reasons one if what that tells me if that’s happening is that builders are scrambling to get those off of their balance sheet in other words they’re discounting those homes.