As the ongoing COVID-19 pandemic, inflation concerns, and the war in Ukraine illustrate, it can be difficult to decide where and how to invest money in volatile environments. As we like to say, we don’t have a crystal ball to predict the future; instead, we focus on the bigger picture to help us identify opportunities. We believe that the multi-family sector – long a bedrock of our real estate investment strategies – deserves investors’ attention in 2022.

In our previous blog, we covered the phenomenon of how a macro real estate bull market erupted from the COVID-19 pandemic. Now, as we (hopefully) begin to come out the other side, the question becomes: how should an investor approach this environment?

Across the board, real estate prices have been increasing, and multi-family assets are no exception. These higher prices have investors looking at low purchase cap rates. Certainly, these factors need to be considered; however, we also believe they should be put into context with what may be on the horizon for multi-family assets.   

The fallout from a Black Swan event, like the COVID-19 pandemic, can manifest itself in counter-intuitive ways. The economic devastation seen throughout the world in 2020 is undeniable; yet, amidst the havoc, we also witnessed one of the biggest booms in housing prices in U.S. history. According to the Case-Shiller National Home Price Index, which tracks price changes of single-family homes, housing prices rose 9.5% from November 2019 to November 2020. How does this happen while we’re simultaneously dealing with the worst pandemic in 100 years?

Recently, the White House released the details of President Biden’s proposed $1.8 trillion American Families Plan. The President’s proposal outlines several tax increases intended to help finance parts of this monumental spending—including changes to 1031 exchanges that, if passed, will severely limit the ability of everyday Americans to complete an exchange.

Tenants in Common (TIC) and Delaware Statutory Trusts (DSTs) are both viable structures to implement multi-owner real estate offerings when completing a 1031 exchange. However, there are several key distinguishing characteristics.

15 years ago I made the decision to step into the world of business ownership, opening the doors to Kuhn Financial (now Kuhn Wealth Management). We built our success on our commitment to providing personalized service and unbiased advice to help our clients plan for their goals.