The apartment investment industry—like many other asset classes—recently experienced a massive bubble. Peaking in the period from 2020 to mid-2022, this particular bubble was driven by multiple factors.
As a proximate cause, risky bridge loans came to dominate apartment investment. These loans made short-term, high leverage, floating-rate debt the norm when acquiring apartment properties. As an ultimate cause, however, the American fiscal-monetary milieu of taxation, redistribution, artificially-low interest rates, and easy money—culminating in the creation of trillions of dollars out of thin air in 2020—provided the driving force.
Besides malinvestment and mispricing, the apartment bubble of 2020-2022 predictably gave rise to charlatans and crooks of many varieties. Riding high during the bubble, some of the most conspicuous syndicators have taken a dramatic turn for the worse.
Moral hazards abound when the FED and the state run their printing presses and lower interest rates to the zero bound. These apartment buyers and investors forgot that prudent business decisions are needed in businesses that hare risky on their face. A lot of apartment investors did their due diligence and were prudent, but they are having difficulties, but these fly-by-nighters federal-reserve-bankers-interest-raters have gone way overboard on their business ethics and are suffering the results. Now all the consequences, both personal and business, are coming home to roost.