Richard

The work world looks vastly different from what it did just a few years ago—with the pandemic forcing many employees and employers to adapt to remote work or else shut their doors potentially for good. And while some companies have made attempts to return their work environments back to a pre-pandemic office structure, many employees have come to appreciate the benefits of a remote-work lifestyle and have shifted their expectations around what they will and will not accept in the workplace.

This evolving attitude, as well as a number of other factors, has made it difficult for some companies to find the talent they need to continue prospering in the market. Here, eight members of Young Entrepreneur Council elaborate on these factors and discuss what employers can do to not only make finding talent easier but also retain that talent once they’ve been brought on board.

1. Ensuring Value Alignment

The hardest thing about finding talent is making sure that the talent aligns with your company values and that people really understand the value you add to the market. That’s why having a great careers page on your website is really important—though most companies completely ignore this. Having a great careers page can help potential employees understand how they fit in and make it more likely that you will connect. – Joe Apfelbaum, Ajax Union

2. Adapting To Shifting Expectations

Finding good talent today is challenging due to shifting job seeker expectations regarding work-life balance, culture and social responsibility. To attract talent, companies should align with these values, offer flexible work conditions and demonstrate commitment to social causes. Leveraging digital recruitment strategies can also widen the talent pool and connect you with like-minded candidates. – Kyle Goguen, Pawstruck

3. Connecting With Candidates Directly

The hardest part about finding good talent is being able to connect with candidates directly. Often, candidates don’t update their online profiles or actively check messages recruiters use to reach out. Companies can do their part to make it easier for candidates by not using complicated portals that require both an engaging online presence and personal information that must be entered twice. – Jack Perkins, CFO Hub

4. Earning Employee Loyalty

The hardest part about finding good talent today is meeting the expectations of the workforce. Loyalty to the company is almost nonexistent, as employees are highly likely to switch companies as soon as they get a better offer. However, one way to find talent easily is to have flexible working hours. Allowing people to work at their own pace to ensure work-life balance is a highly valued perk today. – Stephanie Wells, Formidable Forms

5. Navigating Entrepreneurship Culture

I’d say the hardest part about finding good talent today is navigating the entrepreneurship culture, as the industry’s top talent often prefers to work on their own gig rather than work for someone else. In this scenario, offering an option to work remotely may help you find the right fit for the job, as you get to leverage their skills and they’ll have the freedom to work on their side hustle. It’s a win-win situation. – Chris Klosowski, Easy Digital Downloads

6. Competing With Other Hiring Businesses

The most difficult aspect of discovering good talent nowadays is the intense competition in the employment market. Outstanding candidates are in high demand, making it difficult to attract and retain them. Businesses should prioritize developing a great employer brand, delivering competitive compensation and benefits packages and cultivating a good and inclusive work culture. – Sujay Pawar, CartFlows

7. Sifting Through The Fluff

In my opinion, the hardest part about finding good talent is recognizing whether someone is adding fluff to their resume or whether they are actually as skilled as they claim. An easy way for companies to sort through applications and discover talented individuals is to give applicants paid tests to complete before they’re hired so you can assess their skills. – Daman Jeet Singh, FunnelKit

8. Navigating A Global Talent Pool

The hardest part about finding good talent today is navigating the vast talent pool that has expanded globally due to remote work models. Companies can simplify this process by using artificial intelligence and data analytics in recruitment, building a strong employer brand and leveraging networking and employee referrals. – Vikas Agrawal, Infobrandz

It’s common knowledge that there’s been a shortage of homes for sale for some time. Part of it is due to chronic underbuilding in the days since the housing crash, but lately, higher mortgage rates, which now hover just below 7%, according to Freddie Mac, are also an issue.

It all boils down to the record-low interest rates that most homeowners are holding on to. According to Zillow, a whopping 80% of homeowners currently have rates under 5%, and 1 in 3 even have rates below 3%. 

For those homeowners, selling a home in today’s market means trading up for a much higher interest rate—and likely giving up a big chunk of their sale profits in the process. In fact, the premise is so unappealing that a recent Zillow survey shows that homeowners with rates under 5% are half as likely to sell their home in the next few years. Of those with rates over 5%, though, nearly 40% say they have plans to sell soon. 

“These homeowners face no or relatively little financial disincentive to trading their current mortgage for a new one,” wrote Zillow’s Treva Tam. “On the flip side, homeowners already paying a lower interest rate may be reluctant.”

What It Means for the Market

The Zillow findings aren’t too surprising, but they don’t bode well for the market’s inventory problem—nor for home prices, both now and later (depending on what side of the closing table you’re on). 

According to the survey, a mere 23% of all homeowners are considering selling their home in the next three years—and that includes people who already have their homes listed right now. 

Though new home construction has picked up steam in recent months, the lack of existing inventory hitting the market—both now and presumably down the line—will likely keep home prices elevated for some time.

Of course, if mortgage rates ever come down, then the listings will follow. Once rates dip below that 5% mark—as Zillow’s data suggests—more homeowners will be more willing to put their house on the market. 

Rates that low probably aren’t in the cards anytime soon, however. Though the Mortgage Bankers Association’s current forecast does call for a 4.9% average 30-year mortgage rate by the end of 2024, they’re an outlier—and both Fannie Mae and the National Association of Realtors think rates will be much higher. 

Even Zillow doesn’t expect it any time soon. As Orphe Divounguy, senior economist at Zillow Home Loans, put it, “We expect mortgage rates may notch down slightly as inflation comes under control, but they are unlikely to return to 5% in the near future.”

Adjusting to Higher Rates

Not all consumers have the luxury of waiting around for rates to drop. Job changes, new babies, and major life events will still push some consumers into selling their properties or buying new ones—even with today’s higher rates. 

As that happens, it could bring things more into balance. Fewer homeowners will have those bargain-basement rates, and existing inventory will, therefore, be more likely to hit the market. This could potentially keep home prices (which jumped steadily over the last four months) from rising or even begin to fall. 

The real key factor will be how inventory shakes out. And with the market currently 4.3 million homes short of demand, according to Zillow, there’s a lot of progress to be made.

“Over time, homeowners will likely accept higher rates as the new normal,” Divounguy says. “But until then, the market could remain challenging for home shoppers, who will see fewer options and higher prices.”

Final Thoughts

What is important to note is that the answers to this survey indicate that the number of homeowners willing to list their property on the market is growing, even with the context that rates will potentially stay in similar territory. Could that mean that the “lock-in” effect could come to an end sooner than later? The reality is that people will adjust to the economic environment, and if that means giving up a lower rate for the sake of moving, they might just do that. But does that mean a growing share of listings, coupled with demand still being suppressed by mortgage rates, equals another correction?

It’s way too early to tell, but it’s possible.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

When your main gig isn’t filling your cup, you might be looking elsewhere for what’s missing. Whether it’s milestones, revenue or just excitement, perhaps a side hustle is the way to go. If your full time venture has hit a ceiling that means it’s no longer worth your time, or you’re looking to change focus and transition away, make sure you’re prepared for venture number two by preparing well in advance.

Use ChatGPT for advice and guidance on your side hustle journey and see if you learn anything new. Even if you have a plan, its responses could uncover ways forward you hadn’t considered.

Start a side hustle with these insightful ChatGPT prompts

Assess your resources

Start where you are and use what you have, as the saying goes. Anything else doesn’t make sense, so get a grasp on your existing resources and build from there. Take an inventory of what they are and prompt ChatGPT for its assessment. You might be underplaying the assets you already have in front of you, when you should be leading with them.

“Here are the resources I already have available: [include details of any savings or income, time available, network members, specialist skills or knowledge], as well as strong personality traits of [describe the strengths of your personality, for example hard working, tenacious, confident]. Can you list my top five resources in order of how useful they will be in starting a side hustle? For each one, explain why it’s useful and what I should do to make the most of it.”

Get business ideas

Ideas are common, but extraordinary ones are not. The best idea is one that you feel excited to get going with. It’s aligned with your values and fits with the vision you hold for who you are in the world. The side hustle idea that’s right for you solves a specific problem for a specific audience, who will be primed to buy.

“My main interests and passions are [describe your main interests and passions] and my network includes people who [describe the demographics of people in your network]. Given what you know about my resources, can you suggest 10 side hustle ideas I could start? My goal is to spend [number] hours per week on this project and for it to bring in [amount of money] per [frequency] within [goal for achieving this revenue.]”

Plan the first few steps

You know how you’re best-placed to serve and you suspect you’re onto something with how you’re going to do it. Next is making the roadmap to build your venture into reality. Select your favourite idea (which might be one you already had) and get ChatGPT to break this down in a step-by-step process, so you know exactly how to begin. Add to the prompt with things you’ve thought of yourself, and ask for clarification if any part isn’t clear. Keep pushing back until you have your perfect plan.

“I’d like to explore this idea in more detail: [include the idea you like the best]. Outline a 10-point plan that details the exact steps I should take, with an explainer for each, to make this business a success. Base this on me working [number of hours per day or week] on this venture.”

Create financial goals

If you’re starting a side hustle because you want to earn more money, get a grasp on how that looks in practice. Whether you want to top up your income, earn enough to quit your job, or your side project is a passion project that just needs to break even, figure out exactly what you need to hit to stay in the game. The plan isn’t that this side hustle is propped up by your main venture, the plan is that it outperforms it by magnitudes.

“Given my financial goals of [amount of money] per [frequency] within [goal for achieving this revenue], suggest metrics that I should track to ensure I am on target for this goal. Include how often I should report on this metric. Finally, include a revenue and profit forecast by month, in line with my main financial goal.”

Get the confidence to go for it

With the safety net of your main role or business firmly in place, the risks to you of starting a side project are low. Rock bottom is an unlikely scenario. But it’s easy to forget that if you’re surrounded by the negative stories of the media and naysayers. Ask ChatGPT to be your cheerleader, your biggest fan and the voice of reason that helps you tame that voice in your head that tells you it won’t work.

“Play the role of a motivational coach. I am someone who is planning to start a side hustle but I’m having doubts. I’m questioning my abilities and I’m feeling afraid of taking risks, failing, and embarrassing myself. Give me the confidence that I can succeed in my side hustle. Include what you know about my strengths to reinforce what you say.”

Get help starting a side hustle with ChatGPT

Prepare to make a success of your second business with these five prompts. Assess your resources, get ideas, and receive the plan for turning them into revenue. Figure out your revenue goals by month and get the courage to take action. There’s no excuse to not move forward when your side project sidekick is standing by.

This article is presented by Easy Street Capital. Read our editorial guidelines for more information.

The BRRRR method of real estate investing continues to be one of the most-used strategies in 2023. With interest rates elevated yet property values remaining resilient, finding cash flow with a reasonable down payment is an incredible challenge.  

However, the BRRRR strategy (buy, rehab, rent, refinance, repeat) makes sense for a lot of investors, as value can be created through forced appreciation (renovations) and capital recycled through cash-out refinances. With rates high and competition fierce, nailing the financing piece of the BRRRR method has never been more important.  

This article will explore the loan options facing BRRRR strategy investors, with a focus on the all-important third R: refinance. Specifically, we’ll compare DSCR refinance loans to traditional options, namely bank or conventional loans.

The Evolution of Options

With the publication of Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple by David Greene in 2019, the BRRRR method was publicized to real estate investors, and real estate investing was never the same. In the book, each step of the BRRRR method is meticulously explained, and it’s jam-packed with advice, tips, and information, including two chapters all about the crucial refinance portion of the process.

In the book, Greene details all the different options for refinancing, along with the pros, cons, and details of each. However, DSCR loans are not mentioned.

Why? While DSCR loans existed back in 2019, the product was just getting started and not widely developed or available. A lot can change in just four years (as everyone on the planet who lived through 2019-2023 knows).  

Five years ago, BRRRR method investors were generally limited to conventional loans (under government-sponsored enterprise, or GSE, rules and limits), bank portfolio lenders, or other niche options like private money (individuals). While these options still remain solid options for many investors, the growth and development of DSCR loans has truly changed the landscape for BRRRR strategy real estate investors.

Beginning BRRRR: Buy in Cash, or Use Hard Money?

While refinancing is an important part of BRRRR and can make or break many BRRRR method deals, the first two steps, namely buying and rehabbing, are vital to success. Finding deals is one of the most important skills a real estate investor can have, but it’s not always enough. Finding a deal and closing a deal are two different things—making sure you can move fast and execute a close (and beat out potential competitors) is a prerequisite to a successful BRRRR (if someone else is able to purchase the property, your BRRRR investment is dead).

Many BRRRR method investors make property purchases in cash, whether due to not being aware of other options (using a hard money loan) or thinking it’s better financially. In the BRRRR book, Greene generally limits the BRRRR strategy to cash purchases, but hard money loans, or loans that are generally short-term and higher-rate, have also evolved a lot over the last four years.  

For one, while the hard money terms example used in the book is 14% interest rates and four origination points, many hard money loans today will have fees that are half of that and significantly lower interest rates. Additionally, the internet continues to democratize access to information, and hard money lenders can be vetted and compared much more efficiently online, such as here on BiggerPockets.

Advantages of using cash for BRRRR

What are some advantages of using cash to purchase and fund renovations for BRRRR projects?

• Lower interest cost: Simply, funding your purchases and renovations yourself saves you interest expense—typically a few months’ worth.
• More competitive offers: Many sellers prefer cash offers over ones with financing because there is more certainty of closing (financing will typically require lender diligence periods, which causes time, such as waiting for an appraiser to visit the property and produce a report, as well as risks of falling through—that same appraiser finding an issue, etc.).
• Less risk: Without interest or looming maturity dates, investors are less stressed if rehabs or the renting process are delayed.

Advantages of using hard money loans for BRRRR

However, with these advantages, there are many benefits of using hard money loans to finance the first two steps of the BRRRR method that outweigh the cons for many real estate investors. These include:

• Get started faster: Let’s face it—while reading articles like this and absorbing all the podcasts and books on real estate investing is great, jumping in and actually doing your first deal is critical, and what you learn from experience often dwarfs knowledge from all the research sources by far. By buying and rehabbing with only cash, that means saving up all the funds needed for both—often a minimum of $75,000 to $100,000 at current market prices. Most people, let alone real estate investing beginners, don’t have that kind of money lying around and can only get started on the financial freedom journey by getting a good chunk of these costs financed by a hard money lender (typically up to 85% or 90% for beginners).
• Faster portfolio growth: A key advantage of the BRRRR method is to use the smallest amount of capital to build a portfolio as fast as possible. With the power of compounding, doing three deals at a time versus one at a time can mean the difference of hundreds of properties in a portfolio. As such, an investor funding a $120,000 BRRRR buy and rehab in all cash grows the portfolio much slower than an investor who executes three $120,000 projects with $40,000 invested in each (with hard money financing of the remaining $80,000). 
• Higher leverage on the refinance: Believe it or not, a BRRRR method investor who refinances a hard money loan is looked at more favorably by a lender than someone who bought in all cash. While this may not seem logical, many lenders will give more favorable terms to what is called a rate-term refinance versus a cash-out refinance, the difference typically defined as whether you take home greater than $2,000 at closing of the refinance loan (cash-out) or not (rate-term). Many lenders have seasoning, loan amount, and LTV restrictions that are applied to BRRRR method investors only on cash-out refinances, and these don’t apply if it’s a rate-term refinance.

Additionally, some hard money lenders don’t require appraisals for the purchase of a BRRRR property. This allows a BRRRR method investor to be competitive with cash offers and eliminates one of cash buyers’ main advantages.

Refinancing: Conventional or Portfolio Lenders vs. DSCR

There are multiple considerations to optimize the refinancing portion of the BRRRR method. Generally, for the optimal refinance, these are top of mind for BRRRR strategy investors:

• Return of capital: The key “secret sauce” of the BRRRR method is to build portfolios using the same capital over and over—which relies on getting your basis (or more) back on the refinance, where basis refers to the money you invested in the property (down payment and cash used for renovations).
• Speed: Refinance lenders use the term “seasoning” to refer to the amount of time (typically in months) between the purchase of the property and the refinance. Velocity of money, or speed in which you can complete a BRRRR investment and repeat, is key to success, and refinancing with the shortest seasoning requirements is highly important.
• Loan terms and interest: Cash flow is also an important consideration for a refinanced rental property, so attaining a low interest rate, as well as other aspects of loan structure (term, amortization, or interest only, etc.), plays a big role.

Generally, there are three main refinance options for BRRRR method investors: 

• Conventional loans
• Bank/credit union loans
• DSCR loans

Conventional loans are generally defined as loans originated under GSE (Fannie Mae/Freddie Mac) rules and guidelines and securitized. Bank and credit union loans are generally defined as “portfolio lenders,” or lenders that hold the loans on their balance sheets. DSCR loans are loans issued by private lenders with proprietary and differentiated rules and guidelines and are typically included in “non-QM” securitizations.

The advantage of conventional refinance loans is that they typically have the lowest interest rates and fees. However, BRRRR method investors have run into a lot of trouble using conventional loans for refinances for multiple reasons, especially in 2023.  

One issue is the challenge of qualifying, as conventional loans will have DTI requirements, income requirements, loan size limits, and loan amount limits that investors looking to scale a portfolio run into as soon as the financial freedom snowball starts rolling. But most importantly, in April 2023, Fannie Mae changed cash-out refinance seasoning requirements from six months to a full year. This is hugely problematic for the “speed” aspect of BRRRR investing—drastically slowing down the returns and velocity of capital for BRRRR investors using conventional loans.

Portfolio lenders are another option, and they typically offer competitive rates and fees as well. Banks and credit unions can also offer flexibility for investors that engage in strong relationship-building strategies, offering discounts and solid loans in exchange for borrowers willing to use the institution for other purposes (savings accounts, etc.). However, downsides include regulatory restrictions on bank lending, many institutions that restrict concentration and geographies, and other headaches and issues that arise when dealing with a slower-moving bank.

DSCR loans are the option that has completely changed the BRRRR lending landscape in the last few years. While DSCR loans tend to have interest rates a bit higher (generally 0.75% to 1%) than the other two options, which can challenge cash flow, this comes with some advantages that are uniquely suited to the BRRRR method. These advantages of using DSCR loans for refinances using the BRRRR method include:

• More flexible seasoning requirements: As of April 2023, the seasoning requirements for conventional cash-out refinances is now 12 months, but many DSCR lenders are still at just six months (with some even as little as three). Additionally, for rate-term refinances, many DSCR lenders have no seasoning requirements at all.
• Easier qualification: DSCR lenders have much lighter qualification requirements than conventional or portfolio lenders, such as no DTI, income verification, or tax return hurdles that can slow down or disqualify loans
• Flexibility: While conventional and bank lenders are heavily regulated and follow standardized rules, DSCR lenders have much more flexibility and control over their guidelines. This allows DSCR loans to be more adaptable to the market as real estate investing strategies change, including the BRRRR method. Some examples of this include being able to embrace the “AirBnBRRRR” strategy (i.e., not requiring a long-term lease for the “rent” portion of BRRRR before approving the refinance) or allowing investors to borrow in an LLC or other creative structures.

Hopefully, this article helps BRRRR investors navigate the market in 2023, knowing all the financing options available for success.

This article is presented by Easy Street Capital

Easy Street Capital is a private real estate lender headquartered in Austin, Texas, serving real estate investors around the country. Defined by an experienced team and innovative loan programs, Easy Street Capital is the ideal financing partner for real estate investors of all experience levels and specialties. Whether an investor is fixing and flipping, financing a cash-flowing rental, or building ground-up, we have a solution to fit those needs.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

No one wants to be an average entrepreneur. Dreaming up a big idea and taking the leap with starting a business takes courage. Once you’ve done the hard part, see it through. Assemble all the resources at your disposal to reach the heights that very few do.

You can read all the business books, watch all the YouTube how-tos and have coaching sessions with every expert, but improving as an entrepreneur is a constant process. Add another tool to your arsenal by enlisting the help of ChatGPT.

How ChatGPT can help you up your entrepreneurial game

Establish your values

Without a robust set of values by which you make decisions and frame your actions, you’re at risk of flitting around, copying your friends, and convincing yourself there are easier ways of making money. Your values, once defined, create the blueprint for how you operate. Find out what yours should be by looking at people you admire and dislike. Your reaction to their actions reveals the values that are right for you.

Here’s the prompt to define the values by which your every action should tally: “Please create a set of values for me as an entrepreneur, based on the information I’ll explain. I’ll use these values to make decisions and ensure I’m acting consistently. The things that are most important to me in life are: [describe what they are]. The qualities I most admire in other people are [describe what they are] and the qualities I most detest in other people are [describe what they are]. I do my work in order to achieve [describe your ideal outcomes].”

Identify your main goal

All of your energy focused in one direction will mean you go far. Align your intentions into one goal, and ask ChatGPT to define that goal in simple terms. Over the entire course of your career you can do many things, but for now just focus on one. One mission, one goal, one reason for you to get out of bed every single day.

Edit this prompt with all the details, then let ChatGPT simplify your mission. “I want to achieve lots of things for my business, including: [describe the main things you want to achieve in your career]. Can you help me simplify this into one overarching goal and accompanying mission statement, so I don’t get side-tracked and distracted by other things?”

Consider trade-offs

Optimising for revenue carries a different set of actions to optimising for profit. Maximising your customer experience might come at the expense of your revenue per person. Shorter wait times for customer service might come with more personnel requirements, and so on. Avoid being confused by competing metrics by deciding, in advance, what you’re optimising for and therefore what you’re willing to let slide.

Ask ChatGPT for more detail with this followup prompt: “Within my company we are working on the following projects [outline the projects you’re working on]. We want to achieve our one main goal of [your one main goal], and we’re optimising for [explain what metrics matter the most to you]. Can you help me consider the trade-offs involved in this focus? What should I be prepared to forgo or not focus on in pursuit of my one main goal?”

Subtract the non-essential

Most entrepreneurs are busy doing things that don’t matter. Having a full day gives them a false sense of importance. But with all that rushing around, there’s hardly any time to think about what to work on. But thinking about what to work on is a valuable exercise in itself. Enlist the help of ChatGPT in figuring out where to cut out menial tasks and clear more blank space. Use this blank space to do more of what matters, or just stare out the window and let answers find you.

Figure out where ChatGPT thinks you could subtract. “Here’s what I do within a normal week: [outline your weekly schedule with how long you spend on each item]. Given my one, overarching mission, and what I’m optimising for, can you suggest where I can remove commitments, activities and obligations that don’t contribute towards my goal in a meaningful way? I’m prepared to make big changes to my schedule based on your suggestions.”

Identify blind spots

You don’t know what you don’t know. But those current unknowns are potentially things that could derail your business. ChatGPT can take a bird’s-eye view of your work and professional capability to suggest where you might be missing some intel. By now it knows you pretty well, so it’s well-positioned to offer guidance.

Don’t miss a thing with this simple prompt: “I know my mission and I’m going to start to remove some of the day-to-day tasks that don’t contribute towards it. Given my business of [describe your business], my skills of [describe your five main skills] and my weaknesses of [highlight any potential areas of weakness], can you identify any blind spots that I haven’t considered? Consider internal and external factors and suggest a three-point plan for overcoming each one.”

Design your dream week

Be a better entrepreneur by having a healthy relationship with work. Do this by making the most of your non-work time. When you close your laptop and put your phone on airplane mode, engage in something that makes you feel grateful that you live the life you do. This all comes down to your day-to-day; those elements of a normal week that means it’s a sustainable structure you could happily live on repeat.

Put the components of your dream week into a schedule that works: “For me, a perfect week includes [list the components of your dream week] and by the end I will have achieved [list what you’d like to achieve each week]. My energy is highest [time of day] and lowest at [time of day]. Given that you already know my main goal is [your one main business goal] and that I’m optimising for [what you’re optimising for], can you plan a weekly schedule where each day is filled with my favourite things structured in such a way that I enjoy my time.”

Become a better entrepreneur with these ChatGPT prompts

Become an extraordinary entrepreneur with these six prompts. Define your values, get clear on your goal and know your mission. Identify your blind spots and eliminate the nonessential from your week for a work and life cadence you’re proud to call yours. Ask the questions that the others aren’t asking to achieve the results they can only dream of.

For several months now, I and many others at BiggerPockets have been cautioning that the multifamily market is at severe risk of declining property values—even as the residential market proves resilient. But has a “correction” or perhaps even a “crash” materialized in the multifamily market? Let’s take a look.

The National Multifamily Market is in Bad Shape

As a brief primer, multifamily assets (along with many other commercial asset classes) are valued based on net operating income (NOI) and cap rates. When NOI increases, it puts upward pressure on values. In contrast, when cap rates rise, it puts downward pressure on values. 

What we’ve seen on a national level over the course of 2023 are conditions that don’t look good for multifamily property values. 

Rising cap rates

First, we have rising cap rates. Cap rates can rise for all sorts of reasons, as they are a function of investor sentiment, but the cost of capital, a glut of supply, and slowing rent growth are some of the main reasons cap rates have risen in recent months. According to CoStar, the average market cap rate has risen from 4.9% to 5.6% from Q2 2022 to Q2 of this year. 

This may not sound like a lot, but it makes a big difference in valuation. As an example, take a property with a net operating income of $100,000. One year ago, the average market cap rate in the U.S. was 4.9%. This would give this fictional property a roughly $2.04M value ($100,000/.049). Fast forward one year and the average market cap rate in the U.S. is now 5.6%, making the property worth about $1.78M—a 13% decline in value in just one year. 

Slowed growth

But cap rates are just one side of the equation here. If NOI were to grow, it could offset rising cap rates. Happily, for multifamily investors, rental income has grown year-over-year but at a much slower pace than has been seen in over a decade. 

This slowdown in rent growth is due to a variety of factors, such as a glut of supply and rising vacancy. According to RealPage, rent growth is now under 1% YoY, meaning it is not even keeping up with inflation. Rising rents could theoretically help offset rising cap rates, but from CoStar’s data, it’s not enough. 

These two things combined have led to lower sales prices for multifamily assets, particularly among higher-tier buildings. Looking at the chart below, you can see four and five-star buildings (subjective rankings from CoStar) have fallen much faster than three-star buildings, which are relatively flat. 

On a broad national level, multifamily assets are in a correction. Of course, what happens in each individual market and each individual asset class is different. 

While no one knows for certain what will happen next, if you believe CoStar’s forecasts (which you can see in the charts above), multifamily prices are poised for further declines. Costar is forecasting cap rates to continue marching upward to an estimated 6.5% towards the end of 2024. During that time, rents are projected to grow 4% nationally. If all this came true, at the end of 2024, we could expect a value of roughly $1.6M—an additional ~10% decline from where we are today and a more than 20% decline peak-to-trough. 

What Does This Mean for Investors?

With multifamily pricing facing downward pressure, combined with turmoil and uncertainty in commercial lending, it’s a time for caution in this asset class. There can and will certainly be deals, particularly if there is seller distress or if you plan to add value. But be very selective about what you buy and where. There are likely to be many headwinds in the multifamily space for the foreseeable future. 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Scholarship app Scholly recently made a big announcement: Education lender SLM Corp, better known as Sallie Mae, is acquiring its key assets for an undisclosed amount. That includes Scholly’s app, scholarship administration technology and Scholly Offers, a platform that matches users with strategic partners to help them earn cash back.

“This will allow us to do what it would have required my raising tens of millions of dollars to do on my own,” says Scholly founder Christopher Gray.

Launched about eight years ago, Scholly matches students looking for private scholarship money with likely scholarships, helping them earn more than $100 million in financial aid so far, according to the company. The app also includes such features as an AI-powered proofreader.

The Ability to Scale

For Gray, the acquisition will provide the ability to expand the business. In addition, Sallie Mae will make Scholly, which used to cost $2.99 a month, free for all users. “Our priority is creating more scholarship opportunities,” says Gray. “Imagine all the partnerships we’ve done—We’re just going to continue that on steroids.”

In recent years, Scholly has formed a variety of partnerships with everyone from Amazon to rapper Lil Nas X. In 2022, for example, it teamed up with Google to create a $10,000 scholarship for women from marginalized communities of color in tech. Earlier that year, the company joined forces with entrepreneur and author Bryce Thompson to offer Thompson’s second $100,000 scholarship—10 $10,000 awards given to 10 students.

Users can search the app for scholarships using multiple parameters, such as state, GPA and major. They then get a description of the scholarship, how much money is given away and the deadline for applying, among other information.

For Sallie Mae, the acquisition is part of an effort to position itself as what Donna Vieira, executive vice president and chief commercial officer calls, “an education solutions company.” “It’s very aligned with our mission,” she says. The move follows Sallie Mae’s acquisition of the assets of education technology firm Nitro College in 2022. Scholly will be part of Sallie Mae’s education line of business, which says Vieira, “is focused on producing products and tools and content to engage students and families on this journey to and through higher education.”

The son of a struggling single mother, Gray couldn’t afford to attend college. So, he decided to apply for private scholarships to college, eventually earning $1.3 million in awards from such places as the Bill and Melinda Gates Foundation and the Coca-Cola Scholars Foundation. He attended Drexel University, studying finance and entrepreneurship, and, while there, decided not to waste all the scholarship acumen he’d developed. So he created an app that would help other students looking for aid.