Shifting Strategies: Multifamily Investors Adjust To Sector Slowdown, Mature Cycle
Investor confidence in the stability of the multifamily sector this year remains strong, despite robust new supply levels and concerns regarding rising inflation and aggressive interest rate hikes.
As the cycle continues to mature, investors are shifting their investment strategies to focus less on appreciation to generate crazy returns, and more on stability and betting on assets that will generate steady cash flow.
Existing single-family home sales increased a modest 1 percent over 2017 as limited for-sale inventory kept the market from gaining traction. While many of the factors contributing to a restriction in sales velocity remain the same, changes to the tax code remove some of the incentives to homeownership, and anticipated interest rate increases this spring will bring additional challenges to the future of the housing market.
New Tax Law Holds Favorable Prospects for Commercial Real Estate; Potential to Boost Space Demand and Capital Flows
New tax law retains key provisions for real estate investors. The highly anticipated tax reform recently signed into law by President Trump retained numerous key commercial real estate provisions. The 1031 tax-deferred exchange, the mortgage interest deduction for investment real estate and asset depreciation had few material changes. This consistency in tax law will enable investors to move forward with most of their existing investment strategies. That said, there are many provisions in the new tax law that will have a more nuanced effect on the sector, and these more subtle adjustments could create significant new opportunities for real estate investors.
Finalization of tax rules to reduce uncertainty. Over the last year, elevated uncertainty generated by the range of potential government policy changes, including tax laws, caused many investors to move to the sidelines. A more cautious outlook pervaded the industry as investors awaited clarity on taxes, fiscal policy and a change in Federal Reserve leadership. This perspective could begin to ease as the implications of the new tax law firm up and investors better under-stand how the new rules will affect their investments. The new tax plan offers generous tax cuts to corporations and pass-through entities such as Limited Liability Companies (LLCs), and investors may see the new tax rules as an opportunity to reconfigure their portfolios. The new tax structure will apply to 2018 income for tax filings in 2019.
Coldwell Banker Commercial® NRT is made up of nearly 80 professionals working in the Chicago Metro Area, which includes Southeast Wisconsin and Northwest Indiana. Our commitment is to determine our client’s commercial real estate objectives and help define solutions. We achieve leading-edge results because we provide local expertise coupled with the resources of a comprehensive national network.
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The Coldwell Banker Commercial organization is committed to providing exceptional commercial real estate services across all commercial property types and service lines. We provide guidance in every aspect of the commercial real estate transaction:
SERVICES: Acquisition and Disposition Services • Capital Services & Investment Analysis • Construction Management • Corporate Services • Distressed Assets • Landlord Representation • Market Research & Analysis • Property and Facilities Management • Relocation Services • Startups & Small Business • Tenant Representation
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