FEAR AND UNCERTAINTY IN REAL ESTATE
Fear and uncertainty spell opportunity. Warren Buffet says, “Be greedy when others are fearful.” I do not fear multifamily investment, the favored asset class among real estate investors. The best time to buy is during economic downturns—an important lesson learned during the Dot-Com Bubble and the Great Financial Crisis. Uncertainty will often cloud an investor’s judgment, but this fear will also lead to a swing and miss on compelling investment opportunities. The most overlooked financial metric in real estate valuation is the stabilized yield on cost. It takes interest rate volatility off the table and turns negative leverage into positive leverage.
Rising Costs & Tariffs: Why Acquire, Build, and Sell?
What are tariffs? I get this question often, especially about how they impact the multifamily market. Simply put, tariffs are taxes charged on imported goods. The companies that bring foreign products into the country pay a tax to the government. As a result, it leads to higher construction and manufacturing costs along with other sectors. Unfortunately, the consumer mostly bears this cash burden. The silver lining is that these same cost pressures prohibit new development within the apartment industry (already declining), where market rental rates do not justify new construction. There is a nationwide slowdown in new construction. While tariffs raise prices, these taxes also curb supply and create scarcity, ultimately benefiting existing assets and future development projects.
Regardless, costs have increased and tariffs create uncertainty in the business environment. BAM Capital’s approach to new acquisition and development opportunities remain rooted in sound multifamily fundamentals. Despite the current environment, every acquisition and development project to investors is backed by credible data. Acquiring and building in areas that need supply and staying true to long-term demographic trends are non-negotiables. The company only pursues opportunities when the economics make sense.
The impact of tariffs is currently playing out, specifically toward producing jobs in America. Hyundai recently announced a $5 billion investment in Louisiana to build a new steel plant—a small part of the organization’s dollar commitment to the United States. Combining job creation, a lack of supply, and sustained demand will improve future apartment fundamentals, especially in the core and core-plus multifamily space. That’s BAM Capital’s portfolio. Investing in a supply-constrained environment historically leads to long-term value creation.
Don’t sit on the sidelines. Jump into the game.
Timing markets is not a good strategy, but partnering with a proven sponsor in their field of expertise is a great investment plan. The best time to acquire assets is when competitors are on the sidelines. “You buy your straw hats in the winter.” This phrase is evident today with interest rate volatility and the gap between what sellers want and buyers are willing to pay. However, that disconnect does not stop BAM Capital from uncovering acquisition opportunities. BAM Multifamily Growth & Income Fund IV comprises six Class A apartment communities totaling 1,626 units across Indiana, Arkansas, Pennsylvania, and Missouri, acquired between 2023 and 2024 when fewer buyers in the market created pricing power.
BAM Capital has always been ahead of the curve in providing value to its investors. For example, Apollo Global Management is buying Bridge Investment Group, an owner of 55k apartment units. Coming on the heels of substantial multifamily acquisitions by KKR, Blackstone, and Brookfield, this significant transaction speaks volumes about institutional capital’s outlook on long-term apartment fundamentals. These groups are the best and brightest, but BAM Capital has never taken its eye off the ball in its investment approach with multifamily. It has been proven in the organization’s successful track record. The company is not waiting for interest rates to decrease because then it would be likely that the best acquisition window has closed. For investors, that means access to carefully underwritten deals acquired at a discount, so acting now positions you to benefit from this window of opportunity before the market adjusts.
Market Sentiment: Apartment Supply and the Construction Pipeline
New deliveries will remain elevated in 2025. However, bifurcating these deliveries from construction starts, which are currently declining, is essential. For your edification, new deliveries are development projects currently under construction and in lease-up. In contrast, construction starts have yet to begin for various reasons. These new deliveries will garner plenty of attention again this year but do not underestimate the halt in construction starts and its positive impact on multifamily fundamentals in the long term. Demand has surged to levels that few expected and has outpaced supply in 2024, resulting in positive net absorption. The current sentiment is that this demand trend will continue in 2025 and the foreseeable future. Apartment fundamentals remain sound in many markets and will only improve going forward with the construction pipeline falling off the cliff. More demand than supply is Economics 101.
Lending Relationships
This relationship is underrated by almost every measure. The asset’s financials are scrutinized by the lender, such as the debt-service coverage ratio (DSCR), debt yield, and borrower’s credit. In addition, the borrower is subject to “bad boy carve-outs,” which are clauses in non-recourse real estate loan agreements that allow the lender to pursue the borrower’s personal assets if certain actions or breaches occur, effectively turning a non-recourse loan into a full-recourse one. This dynamic can’t go unnoticed. BAM Capital has a long-standing relationship with a local lender that will problem-solve during challenging times if and when they occur.
Concluding Remarks
I do not like personalizing a business document, but I feel it is appropriate here. I have been working in real estate for more than 30 years now. While there is an inherent risk with all investments, the absolute best time to acquire real estate is during economic volatility and uncertainty. Targeting an attractive investment basis and return for its investors defines BAM Capital. I am fortunate to work with the real estate varsity team, an organization characterized by a “loyal and loving family” for the company and its investors. The firm focuses on things within its control, such as controlling operating expenses, boosting ancillary income, and building an incredible culture fostering growth—a direct path to a positive bottom line.
These market dynamics, combined with a proven sponsor who is an expert in multifamily, should alleviate fear and uncertainty. These concerns should not be the only factors when making an investment. It could lead to a missed opportunity at building generational wealth. The sponsor is as important, if not more important, than the physical real estate.
Disclaimer: This document is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell securities. Investment opportunities offered by Bam Capital are made pursuant to Rule 506(c) of Regulation D and are available exclusively to accredited investors, as defined by the Securities and Exchange Commission (SEC). Verification of accredited investor status is required before participation in any investment. The information contained herein reflects the opinions of the author and does not necessarily represent the views of Bam Capital. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect opinions and are subject to market fluctuations, economic conditions, and investment risks. Investing in private real estate securities involves significant risks, including but not limited to illiquidity, economic downturns, and potential loss of invested funds. Past performance does not guarantee future results. Prospective investors are strongly encouraged to conduct independent due diligence and consult with legal, tax, and financial advisors before making any investment decisions. Bam Capital makes no representation or warranty regarding the accuracy or completeness of the information contained herein.
© 2025 Bam Capital. All rights reserved.
Author: Tony Landa, Chief Investment Office, The BAM Companies, April 2025
