More than two years after the Federal Reserve’s interest rate hikes began, some real estate investors are still sitting on the sidelines, waiting for more clarity on pricing.

Hamilton Point Investments isn’t one of those companies. In May and June, the Old Lyme, Connecticut-based multifamily investor bought four Houston properties, totaling 1,174 units, for $195 million. 

HPI secured the properties, built in 2022, at a cost per unit of $166,100. Matt Sharp, HPI’s co-founder and managing principal, said those assets would have cost $210,000 per unit two years ago. He estimates that building a new apartment building in Houston today would cost $190,000 per door.

“Right now, we're buying virtually 100% brand new properties directly from developers who are coming to market at a time when the world is overbuilt a little bit and they're not hitting their targets,” Sharp told Multifamily Dive. “So, we're able to buy this stuff for a bit less than their development cost, which is attractive.”

Overall, HPI, which has raised equity through broker-dealer and financial advisor networks, owns 2,800 units in Texas and 11,264 nationwide. Since its launch in 2009, the firm has acquired 32,000 apartments. Even though the company has been active since its inception, Sharp says today’s prices are the best he’s seen in over a decade.

“This, to me, is the best buying opportunity since 2010 and 2011,” Sharp said. “There are so many markets — Houston is a good example — where the population growth is still extraordinary, but development outpaced it.”

Here, Sharp talks with Multifamily Dive about the current buying window, the fundraising environment and apartment technology.

This interview has been edited for brevity and clarity.

MULTIFAMILY DIVE: How long will this buying window stay open?

MATTHEW SHARP: I think it is certainly through the balance of this year. We're not really focused on rates coming down too much.

We're thinking things stabilize a little bit and the market sort of adjusts to these interest rates that fall to a five-year fixed rate at 5.75%. That was 3.75% two years ago, and it was 6.75% a year ago. But there is definitely a great buying window right now because there are sellers that need to sell, especially new construction.

You’ve recently purchased a number of new properties. Are you also looking to buy older properties?

Virtually everything we've purchased for the last 15 years has been 15-year-old properties that we can improve from a solid B to a B-plus by adding new kitchen and bathroom items and by cleaning up the exterior. We were buying well below replacement costs and upgrading a little bit. During that period, the brand-new stuff just wasn't a bargain. 

Right now, there are certainly opportunities down the food chain. But we just love this opportunity with newer properties. If we had to place $3 billion a year, we would open things up. But what we're seeing certainly for the next year and for the last year, this is where we're going to be.

How has the fundraising environment been for you over the last couple of years?

There is continued interest in apartments just with the generic idea that you will have inflation from rents that will help keep your cash flows up. You wouldn’t have that when you've got contractual rent increases for retail or industrial. So we have seen good demand, at least with our investor base. With every fund that we raised, we ended up with new investors. 

There are some syndicators out there that are going to create a taint for those investors. But generally, apartments are a very, very favored class right now. Student housing has also been on the upswing for the past nine months as well.

How are you incorporating technology into your apartments?

People get enamored of technology, but apartments are a very personal experience. It's where you live. What we have found is that people really do want the availability of somebody to talk to, especially on the maintenance side, about issues that may arise.

You don't want to have key cards for everything. At some point, human interaction is important. Our on-site staff has good relationships with our residents. So, we have not tried to pull folks physically off of properties like the public REITs have done. It has served us well so far. 

Do you use pricing software?

We're not married to pricing software. Pricing software that is not properly managed is no software at all. And we don't really want to jam our tenants out of affordability. 

Just because you can get 12% increases doesn't mean you should charge that. If the market softens, people will remember that you were the one property that really squeezed everybody. 

We're happy to have technology as a leg of the stool, but you have to make sure that you’re making calls based on the people on the ground.

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