Investment Options

Is Now the Right Time to Invest in Private Real Estate? Insights from Tim Wallen, Principal & CEO

author-image
author

Timothy Wallen

Principal & CEO

Why Timing the Market is Hard: Insights from a 35-Year Real Estate Veteran

The real estate market has always been a dynamic landscape, filled with challenges and opportunities for both investors and professionals. With over 35 years of experience in the real estate business, I’ve seen numerous cycles and many opportunities arise. One common theme I’ve encountered is the desire among many investors to time the market perfectly. However, timing the market is incredibly difficult, and this approach can often lead to missed opportunities.

Market Conditions & Investment Opportunities

The real estate market is currently experiencing a shift that has created a favorable environment for buyers:

  • Institutional fund inflows are down approximately 80% from previous years, resulting in reduced competition.
  • This reduced competition allows us to acquire assets at historically favorable cap rates of 5.5% to 6% and significantly below replacement cost.

Consistent investment over a long period of time tends to produce the best results. Trying to time the market precisely, aiming to buy at the absolute low, often means missing out on great opportunities. Today’s market presents an interesting scenario where the assets we purchase now are likely to be sold in the future when interest rates are lower, potentially resulting in better cap rates on the resale. While we are not underwriting this, it is a valid consideration in todays marketplace. 

Strategic Focus, Targeting High-Quality Assets

Our strategic focus is on acquiring high-quality, newer properties (10-15 years old) located in prime areas.

Acquiring high quality assets in quality locations today with excess supply and at a time when capital is scarce provides the opportunity to achieve NOI growth that exceeds our expectations and sell in a more aggressive capital markets environment in three to five years to achieve outsized value growth. 

Additionally, we are leveraging opportunities to buy out institutional investors at attractive prices, reflecting the current favorable acquisition conditions.

Market Dynamics & Future Outlook, Tighter Market and Revenue Growth

In recent years, the market saw significant excess supply created. This has lead to higher vacancies and softened rent growth. However, according to CoStar, new construction starts have slowed significantly, with projections suggesting only 50,000 units per quarter by mid-2024.

As the market starts to absorb this excess supply, we anticipate several positive developments:

  • Improved occupancy rates
  • Reduced concessions
  • Higher rents

This tighter market could result in gross revenue growth of approximately 15-20% over the next 2-3 years, significantly increasing property values. But how? 

Consider the impact of market tightening on revenue. If offering one-month free costs you 5-6 % of gross revenue in a year, improving occupancy from 91% to 94% adds another 3%, totaling around 8% growth. Combined with potential rent growth of 6-10% over the hold due to tighter market conditions, this can result in gross revenue growth of 15-20% on a particular property, greatly impacting its value.

Exciting Times Ahead

Investing in private real estate today is particularly exciting. I, myself, am fully committed and have placed more money into Fund VI than any previous Fund. I am enthusiastic about the opportunities this market presents and encourage others to share in this excitement. We believe it is an excellent time to invest, and participation in Fund VI reflects this belief.

In conclusion, while timing the market is hard and often not advisable, taking a consistent and strategic approach to investing in high-quality real estate can yield significant benefits. The current market conditions create a favorable environment for investment, and the future outlook suggests strong growth potential.

Exciting times are ahead for those who are prepared to invest wisely in the ever-evolving real estate market. To speak with a team member, please visit: mlgcapital.com/get-started-form/ 


Blog:

This (“Blog”) is presented by MLG Marketing, LLC (“MLG”) and is provided for information purposes only and is not an offer to sell an investment in a security. This Blog is not intended to be relied upon as a basis for an investment decision, and is not, and should not be assumed to be complete. Recipients of this Blog shall make their own investigations and evaluations into any investment offerings and review the appropriate disclosure documents for such investment prior to making an investment decision. The information contained in this Blog may be preliminary in nature. MLG does not make any representation or warranty as to the accuracy or completeness of any information presented herein. Any opinions, case studies or conclusions expressed herein, are based upon certain assumptions. Other events, which were not considered, may occur and may significantly differ from the assumptions made herein. Any assumptions should not be construed to be indicative of the actual events that will occur. Actual events are difficult to predict and may depend upon factors that are beyond MLG’s knowledge and control. The recipients of this Blog agree that MLG, its affiliates and their respective partners, members, employees, officers, directors, agents and representatives shall have no liability for any inaccuracy, misstatement, omission of fact or for any opinion or conclusion expressed herein. The contents of this Blog are not to be considered as legal, business or tax advice, and each recipient should consult their own attorney, business advisor and tax advisor as to legal, business and tax advice. By reviewing this Blog, each recipient of this Blog agrees that it will (i) not copy, reproduce, or distribute this Blog, in whole or in part, to any party, and (ii) keep confidential all non-public information contained herein.

Past performance and results are not indicative of future results.


Video:

This (“Video”) is presented by MLG Marketing, LLC (“MLG”) and is provided for information purposes only and is not an offer to sell an investment in a security. This Video is not intended to be relied upon as a basis for an investment decision, and is not, and should not be assumed to be complete. Recipients of this Video shall make their own investigations and evaluations into any investment offerings and review the appropriate disclosure documents for such investment prior to making an investment decision. The information contained in this Video may be preliminary in nature. MLG does not make any representation or warranty as to the accuracy or completeness of any information presented herein. Any opinions, case studies or conclusions expressed herein, are based upon certain assumptions. Other events, which were not considered, may occur and may significantly differ from the assumptions made herein. Any assumptions should not be construed to be indicative of the actual events that will occur. Actual events are difficult to predict and may depend upon factors that are beyond MLG’s knowledge and control. The recipients of this Video agree that MLG, its affiliates and their respective partners, members, employees, officers, directors, agents and representatives shall have no liability for any inaccuracy, misstatement, omission of fact or for any opinion or conclusion expressed herein. The contents of this Video are not to be considered as legal, business or tax advice, and each recipient should consult their own attorney, business advisor and tax advisor as to legal, business and tax advice. By reviewing this Video, each recipient of this Video agrees that it will (i) not copy, reproduce, or distribute this Video, in whole or in part, to any party, and (ii) keep confidential all non-public information contained herein.

Past performance and results are not indicative of future results.

Investment Insights to Keep You Ahead

EXPLORE MORE INSIGHTS
  • news image
    News & Events

    Tim Wallen sits down for interview on Real Finds Podcast

    READ MORE
  • news image
    News & Events

    MLG Capital Acquires Nine-Building Industrial Portfolio in Suburban Minneapolis

    MLG Capital has acquired the Golden Triangle Portfolio in suburban Minneapolis for an undisclosed price. The flex portfolio includes a blend of industrial and office space across nine buildings in Edina and Eden Prairie. Golden Triangle is the 20th acquisition within MLG’s most recent fund, MLG Private Fund VI, and its 48th investment in metro Minneapolis. MLG partnered with Big River Real Estate on the acquisition. Read more on REBusiness Online.

    READ MORE
  • news image
    News & Events

    MLG Capital Purchases Golden Triangle Portfolio in Minnesota

    Flex property portfolio will support the Minneapolis MSA’s strong job market and growing labor force Brookfield, Wis. (November 20, 2024) – MLG Capital – a national leader in diversified private real estate investments ­­– today announced its acquisition of the Golden Triangle Portfolio in the Minneapolis MSA. The flex portfolio includes a blend of industrial and office space across seven properties, nine buildings and 67 suites located across Edina and Eden Prairie, Minn. “MLG is excited to be partnering with Big River Real Estate in the acquisition of this flex industrial portfolio,” said Nathan Clayberg, Vice President at MLG Capital. “We believe this product type is highly desirable given the lack of new supply that has been created over the last 20 years. When combined with the demand of a desirable submarket in the Minneapolis metro, we think the Golden Triangle portfolio is going to be a great acquisition.” MLG believes the Minneapolis MSA is well-positioned for industrial and office assets, with a lower unemployment rate than the national average, 15 Fortune 500 companies and a lower industrial vacancy rate than the national average, according to Costar. The greater Minneapolis MSA is home to about 3,690,000 people and major employers,...

    READ MORE