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Top Real Estate Syndication Trends in the U.S. 2022

Top Real Estate Syndication Trends in the U.S. 2022

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By TJ Lokboj
There are multiple 2022 real estate syndication trends every real estate syndicator needs to be aware of. With the economic volatility and negative headlines, more passive investors are exploring alternatives to traditional stock investments.  As a real estate syndicator, you may be worried about what 2022 will look like. What impact will these record levels of inflation have on you and your investors? Will COVID 19 still impact market trends? Will rental rates keep rising?

In this passage, we’ll address all of these questions and more. The key to gaining and keeping the trust of your investors is to instill their confidence in you. Having a pulse on where the real estate syndication space is headed in 2022 can help you guide your real estate investors through these uncertain times.

1. Inflation will become even more of a risk for investors and syndicators

Inflation has been a hot topic in recent news. You’ve likely noticed rising gas prices every time you go to fill up. It also has an impact on your real estate investments. Inflation has been exacerbated due to the currency that has been injected into the American economy and the pockets of consumers. This paired with the shortage of supply and the higher costs of labor has resulted in this high inflation environment. Inflation is expected to become even more of a risk for investors and syndicators as the year progresses.

For the past 15 years, real estate syndicators have experienced low interest rates along with gradual economic growth. Interest rates are also expected to increase as we get farther into the year. The Fed has already increased interest rates twice in an attempt to get inflation under control. The Federal Reserve may continue to increase interest rates throughout the rest of 2022.

Many experienced investors are liquidating some of their investment portfolio in order to capitalize on high property values. While a real estate investor can make a sizable profit on a real estate investment if they sell their property now, finding another affordable real estate property to reinvest their capital into could be a challenge.

Real estate investors are losing their purchasing power as increasing inflation depletes the value of the dollar. There is also a shortage of supply in real estate properties. This isn’t to say there aren’t real estate deals in the market right now. This is, however, a by-product of the current stage of the economic cycle every savvy real estate investor should understand.  If you’re thinking about selling a real estate investment you currently own, make sure to keep this in mind.

2.  The growth of Sunbelt markets as a result of urban residents relocating.

The pandemic had lasting impacts on real estate syndicators throughout the country. When the pandemic struck, many urban metro inhabitants migrated from large cities to cheaper, more business-friendly states. Cities like New York, Los Angeles, and San Francisco experienced a mass exodus of people who now found themselves working virtual and hybrid jobs.

Other factors that motivated people to move from Northern cities to Southern states was the warmer climate, lower housing prices, and lower taxes.

Some of the real estate markets that experienced the highest influx of people are listed below.

* Phoenix, Arizona

* Austin, Texas

* Tampa-St. Petersburg, Florida

* Charlotte, NC

* Raleigh/Durham, North Carolina

* Atlanta, Georgia

* Dallas-Fort Worth, Texas

This mass migration has made the Sun Belt states hot markets to invest in. Syndicators should be aware that most savvy passive real estate investors understand this trend, and are looking for investment opportunities in these markets. The continued trend of working virtually is likely to continue to cause urban residents of major metros to move to other states.

Moving forward into Q2 of 2022, syndicators can expect the Sunbelt states to continue to grow in popularity, and as a result, demand for investment opportunities there will also increase as the year progresses. These markets are great places to start looking for real estate projects in, and if you find a real estate deal there, there are many real estate investors you can raise investment capital from.

There is growing competition for real estate deals in these markets. Now is a great time to begin building relationships with brokers in these markets. It wouldn’t be a bad idea to schedule an in-person property tour in these markets so you can get some face-time with the brokers there. In-person tours can help you establish rapport and credibility with brokers. As these markets become increasingly competitive, broker relationships will prove to be invaluable to you as a syndicator.

3. Rental rates will continue to rise and cement multifamily as a strong asset class for syndicators and their investors.

Due to multiple factors, rental rates are likely to continue to rise throughout 2022. The trend of increasing home prices isn’t going away in the foreseeable future. This means that Gen-Z and Millennials cannot afford to buy a home, and are going to keep renting apartment units.

These populations are also motivated by flexibility. As a result, demand for multifamily units is increasing. This strong demand allows apartment owners to increase rents.

It is important to note that real estate property values are also rising. This increase in property values comes from both an investor’s ability to increase rental premiums, and by the lack of supply in the housing market. Syndicators and real estate investors in the multifamily space may be happy to hear that this increased demand and low supply of houses will continue to allow them to raise rental premiums at their apartment properties. Inflation is another factor that has contributed to rising rental premiums. As inflation rises, so does the cost of housing.

Rental rates are projected to grow around 7.1 percent throughout 2022. This is slightly less than they grew last year, but they are still expected to increase nonetheless. Higher rental rates increase the net operating income of a property, which benefits the apartment owners and any passive investors in the real estate deal. Rising rental rates make multifamily a more attractive option for syndicators.

Potential investors are also eager for opportunities in the multifamily space. Many passive investors are finding refuge in multifamily properties. In this high inflation economy, passive investors are looking to place their capital into hard assets. Multifamily is growing in popularity and demand on the passive real estate investment side as a result. Multifamily real estate deals will continue to be attractive real estate investments for passive commercial real estate investors to put their personal capital into.

If you plan to raise real estate capital…

It’s important for every real estate investor to understand the trends that factors like inflation and COVID-19 are impacting. The current volatility and uncertainty in the market has resulted in more opportunities and risk for every syndicator and real estate investor.  In order to adapt and make the most of the current market, real estate syndicators need to understand these trends.