January 2025

Things are off to a slow start this year. We saw a seasonal slow down late last year, which has made clearing any vacancies slower that usual. However things are picking up and new lease rates are trending slightly better than exiting tenants. I expect leasing to get back to full speed shortly.

For those of you with student properties, we are seeing about 50% renewing in 2025 on average with modest increases in rates. Butte College enrollment is up 9% compared with last spring and CSUC was up 3% in Fall 2024 year over year. Those are modest but good trends.

Tax & Misc

Please connect me with your CPA if you'd like me to work directly with them for your 2024 returns, especially if you changed firms. For those of you in partnerships with me, our LLCs returns are underway and K1s will be sent once things are filed. Lastly, if you acquired anything last year and need a cost segregation study done, please let me know with some notice before your return is due.

Ken McElroy had a interesting take on the tariffs strategy and how it could affect the USD and real estate.

2025 Outlook

Things are looking a little bumpy for the multi-housing market in 2025. Basically, everyone's cautious, waiting to see how things shake out this year. 

Why? Well, lenders are still playing the "extend and pretend" game instead of foreclosing. Remember back in 2022, when many were getting those one-year loan extensions? Lenders are mostly giving extensions instead of taking back properties. They just don't want a repeat of 2008.

Sure, these extensions came with some strings attached, like fees and rate caps. But the problem is, a lot of these extensions are expiring in 2025. Think about it: those 3-year bridge loans from 2021 and 2022 are coming due.

Lenders don't really want to foreclose unless borrowers completely stop paying. They'd rather swap out the current owners/managers for someone new and give them better terms. But even then, a lot of folks can't handle these high interest rates or come up with the extra cash lenders want.

Today's Interest Rates

MULTIFAMILY (5+) | 6.60% AVG

5.75% LOW - 7.15% HIGH

All that to say, there may be some good opportunities for the first time in a while from expiring debt.