The Five Tough Questions Every Investor Needs to Ask About Right Now

Earlier this summer, our Chief Investment Officer Ian Formigle had the opportunity to sit down with Dr. Peter Linneman, renowned economist and Founding Principal of Linneman Associates, LLC, a leading real estate advisory firm.

During their conversation, Dr. Linneman explained why:

• He believes we’re in a golden era for multifamily
• How demand was always going to come back faster than supply post-COVID, and why that’s a better option than the alternative
• He expects to see inflation moderate notably by the end of 2022
• Recessions can become a self-fulfilling prophecy if consumers scare themselves into one

We agree with Dr. Linneman’s stance that, “Real estate is not in the business of the next 20 minutes or the next 20 hours or the next 20 days or the next 20 weeks: it’s in the business of the next 20 years”. While rocky, we believe the events of 2022 are moving the commercial real estate market back to a more sustainable outlook.

Investing in commercial real estate entails substantive risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital. All investors should consider their individual factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. An investment in a private placement is highly speculative and involves a high degree of risk, including the risk of loss of the entire investment. Private placements are illiquid investments and are intended for investors who do not need a liquid investment.

In addition to more general risks such as high vacancy rates, oversupply of product in the market, and credit quality of tenants, some of the factors that can impact the success or failure of multifamily investments include competition from single-family homes, fluctuations in the average occupancy rate, and increases in mortgage rates that can make debt financing more expensive.