The Multifamily Owner’s Dilemma: To Sell, or Not to Sell, That Is the Question!

The multifamily market has been booming since 2012, the darling of all commercial real estate sectors. Property values have continued rising even in the face of new construction adding significant inventory to the market. If you’re reading the same things I am, you have to be confused by the disparate advice you’re receiving. When all is said and done, there is no universal answer to this question. It comes down to your property investment strategy, including your personal objectives, and your expectations for environmental variables in the future. There is an excellent article on investment property disposition strategy by Burt Polson, CCIM at 16 Loaded Triggers to Sell - theBrokerList Blog.

Sell: This is perhaps the easier decision to make because something is motivating you to sell. Maybe you’re a “fatigued owner,” as defined by Mitch Siegler, Senior Managing Director of Pathfinder Partners in ‘Fatigued Owners’ Are a New Breed - Daily News Article - GlobeSt.com; he defines them as owners who “…didn’t lose their properties [in the financial crisis], but they’re eight to 10 years older and have either had health issues or passed away and their estates are dealing with these real estate issues.” It may be that your property needs capital infusions to make it competitive in the current apartment market. Or you see interest rates rising, which will lead to higher cap rates and resulting lower values. Or you want to reposition your financial portfolio. A response of “yes” to any one or more of the 16 triggers tells you it’s time to sell your multifamily property.

Not Sell: So you’re not a fatigued owner, and none of the other 16 triggers applies to you. You've been reading and agreeing with articles such as Fundamentals Call for Patience, Prudence - Commentary Article - GlobeSt.com by Matthew Galligan, President, CIT Real Estate Finance or Pricing-Values-Still-Have-Room-to-Grow - Editorial - GlobeSt.com by Paul Bubny. That means you’re still in the “hold” phase of your investment. After all, if you sold a property in 2006 you probably regretted not selling it instead in 2007. BUT 2008 proved that the laws of gravity have not been repealed. Even without a strong motivating trigger to action, do not be complacent in this phase. Spend time reassuring yourself about your assumptions concerning environmental variables. And remember that the resident market has become much more competitive with the newly constructed units coming into the inventory (but not overbuilt in my opinion); so you need to be undertaking any necessary physical improvements and/or repositioning needed to have your older property remain competitive holding or increasing its value.

If you would like to discuss these thoughts in more detail, or need assistance with your investment strategy development, please contact me:

            Paul B. Hazlett
            Real Estate Investment Advisor
            Coldwell Banker Commercial - Benchmark
            904.421.8523
            PHazlett@CBCBenchmark.com