Landlords pumped billions into apartment buildings during the pandemic. That bet could now go horribly wrong.

Yahoo Finance ^ | 4/26/23 | Daniel Geiger

[CFW]

Big money investors pumped billions into buying up apartment buildings in the pandemic era.

The deals were often based on the assumption that rents would continue to increase.

But rents are flatlining and expenses are increasing, leaving landlords to face big losses.

While offices have been going through a paradigmatic shift as more workers do their jobs remotely, apartment buildings have experienced robust demand from tenants.

But fault lines have emerged for investors who paid top dollar for assets that depended on substantial rent increases and persistent low interest rates to achieve profitability.

Those kinds of optimistic projections became increasingly necessary in the booming markets of 2021 and 2022, when investors grew voracious for apartment-building acquisitions, boosting competition and prices. In those years, investors purchased $355.5 billion and $299.2 billion worth of apartment buildings, according to MSCI — unprecedented sums that far surpassed the previous $194 billion record of multifamily sales in 2019.

"To win a deal in that hypercompetitive market, investors needed to make ambitious predictions how they could grow rents and control expenses," said Will Mathews, a mutlifamily-investment-sales broker at Colliers. "What they've found is that rents have plateaued or have even come down in some markets and expenses have skyrocketed."

[KevinB]

I work closely with a company that owns apartment buildings. I have access to the financials. It’s like printing money

[spintreebob]

I rented from a large landlord, thousands of units in metro Atlanta,tens of thousands nationwide. They had the same payment ratio during covid as pre-covid. The same people who are conscientious are conscientious regardless.

The same people who say “the dog ate the rent” are the same people who blame covid.

Many years ago I was landlord of apartments in Chicago. The working poor and the welfare had exactly the same income. The working poor always paid the rent. Never lost a dime on them. The welfare poor (with a few exceptions) always fell behind and never cought up.

[linMcHlp]

bkmk

[mass55th]

I’ve never owned a piece of property in all my 75 years. Always rented, always had a job to pay my rent each month. I’ve lived here about 23 years. I have a two bedroom, one bath apartment, galley-style kitchen, large dining area, large living room, walk-in closet in my bedroom and in the hallway, small food pantry in the same hallway, and a double closet with sliding doors in the 2nd bedroom, storage area in the basement, dish washer, garbage disposal, central air conditioning. I pay my own utilities. Garbage and water are included. If I told you what my rent was, you’d think I lived in the slums. The landlord just takes care of their long-term, elderly tenants. Most of the time if they have to raise the rent, they limit it to 5 or 10 bucks. They’ll have to carry me out of here.

[Jim Noble]

Big money investors pumped billions into buying up apartment buildings in the pandemic era. The deals were often based on the assumption that rents would continue to increase. But rents are flatlining and expenses are increasing, leaving landlords to face big losses.

Too bad, so sad.