The Cap Rate “Con” and Multifamily Investing Madness

Cap rates affect multifamily investing more than most investors come to realize. If you’re in the commercial real estate space, you know that as cap rates decrease, price points for apartment complexes increase. And, as cap rates start to expand, multifamily prices begin to dwindle. With rising interest rates and high labor/material costs, the multifamily market should see a decline in property valuations. But that isn’t what’s happening.

Behind the scenes, a group of investors is unknowingly keeping this multifamily boat afloat, artificially inflating cap rates and keeping prices at record highs. The problem? This makes average asset prices skyrocket to almost unaffordable levels, ruining the playing field for any investors who can’t outright buy a multi-million dollar property in cash. Ashley Wilson, experienced multifamily investor, calls this the “cap rate con” and blames much of today’s high multifamily pricing on it.

Ashley is a veteran real estate investor with a decade and a half of experience. She’s been investing in large multifamily housing since 2018 and is shocked at what’s happening today. This “multifamily madness” is affecting investors across the board, and she’s convinced that it must come to an end. But what’s causing these inflated prices? How are multifamily investors reacting? And is there still space for the new investor to make money? You’ll have to tune in to find out!

00:00 Intro
02:35 Ashley's Asset-First Background
05:01 1031-Induced Multifamily Madness
19:51 Why Aren't Cap Rates Expanding?
34:03 Are Investors Still Buying?
38:54 Advice for Passive Investors
47:24 Rate Hikes
56:49 Connect with Ashley!
57:23 Takeaways

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Episode 52

Show notes at: https://www.biggerpockets.com/blog/on-the-market-52?utm_source=youtube&utm_medium=description&utm_campaign=none

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