In 2018 / 2019 I made a number of multifamily real estate investments. The commercial real estate market bottomed around 2010 and really started to gather steam in 2014.
So my buys weren’t exactly at the right time. Fast forward and two of these investments are tracking at 2.5-3x and 3.5-4x. The two schools of thought are (1) never sell good real estate – let it compound forever or (2) buy in distress and sell in exuberance. In this case, multifamily cap rates, even in tier 2 / 3 market, are pushing below 5% (at least before rates started backing up). The last cadre of the least informed investors are piling in as they look back on tremendous 5-10 year returns.
Given I look across asset classes, I have the benefit of not having to find something similar in real estate if these investments liquidate. In this case the first investment is starting to sell buildings and the second went to market but turned down a 3.8x offer (?!). I’ll be happy to reallocate whatever funds come back at much lower multiples and higher yields, perhaps in public markets.