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!

In This Episode We Cover

How a pandemic-fueled buying spree massively inflated multifamily housing cost

1031 exchange investing and how “all cash” buyers are damaging the system

The “cap rate con” leading to surging property price hikes without reasoning

How to evaluate a multifamily investment property in three different ways

Advice for passive real estate investors and those investing in syndications

Whether or not a wave of multifamily defaults is on the horizon

And So Much More!

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Book Mentioned in the Show

The Only Woman in the Room by Ashley Wilson

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Check the full show notes here: https://www.biggerpockets.com/blog/on-the-market-52

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52: The Wrath of 1031 Investors and a “Chaotic” Multifamily Market w/Ashley Wilson 01:02:16 Share

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Shownotes Transcript

52: The Wrath of 1031 Investors and a “Chaotic” Multifamily Market w/Ashley Wilson