Mike Swenson - The $300 Billion Real Estate Opportunity

Roughly $300 billion in multifamily mortgage debt is scheduled to mature in 2026—but does that mean $300 billion worth of distressed apartment buildings are about to hit the market? Not necessarily. It means thousands of property owners are facing a decision: refinance, sell, bring additional capital to the table, or find another creative solution. And when today's financing environment looks very different from when many of these loans were originally made, some interesting opportunities can emerge. 

In this episode with podcast host Mike Swenson, we break down what the $300 billion maturity wave really means for real estate investors, where potential distressed opportunities may be hiding, and how investors can find owners who need solutions, not just buyers looking for a bargain. We’ll explore refinancing challenges, creative financing, seller financing, loan assumptions, motivated sellers, and the key question every investor should be asking: What problem can I solve that creates a win-win real estate deal?

In this episode, you will be able to:

• Understand how upcoming multifamily debt maturities can create new real estate opportunities.
• Learn how changing circumstances, partnerships, and financial pressures can create opportunities to solve sellers’ problems.
• Discover how to find potential deals by building relationships with brokers, lenders, property managers, contractors, and other owners.
• Explore how seller financing and seller carrybacks can help structure deals and reduce the amount of capital needed at closing.
• Learn what factors to evaluate when determining whether a multifamily property is a good deal, including population growth, employment, location, unit mix, and rent potential.
• Understand why analyzing the market’s future demand is important when dealing with loans that may come due in five years.

The key moments in this episode are:
 

0:00 – Life Changes Create Opportunity
3:52 – Refinance Deadlines Are Not a Disaster
6:26 – Why Owners Sell Good Properties
9:23 – Where to Find Off-Market Leads
13:10 – Seller Financing & Carryback Basics
16:58 – What Makes a Deal Worth Buying

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Full transcript here:
Mike Swenson

It doesn't mean you know the building's on fire. It doesn't mean that there was, you know, some landmine that went off. It could just mean life changed and we've we've got some different problems to solve. So there you get to step in and help solve a problem and meet a need and hopefully take advantage of a great opportunity. Uh it doesn't mean that, you know, a person's going into bankruptcy or if they can't sell this property, the whole world's gonna end. It just means life changed. You can step in, you can help solve problems.

Mike Swenson

Welcome to the Real Freedom Show. We inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. Let's get some real freedom together. Hello, everybody, welcome to another episode of Real Freedom, where we help people build time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. If you want to get started on your real estate journey, check out our website freedom throughrealestate.com. FreedomThrughrealestate.com is where we put all of our great content, all of our messages, interviews, and other great blogs for you to get started and figure out what you want to do in real estate. So it's all about taking action, and we want to make sure that we can help you any way that we can.

Mike Swenson

And today I'm excited. I've got a cool opportunity, cool topic to talk about. We're titling this the $300 billion real estate opportunity. And for those of you listening, you're probably wondering what the heck is this about? Essentially, I read an article. It talks about in the next year here, there's gonna be about $300 billion of debt that's gonna need to be dealt with as it relates to multifamily real estate. So if you're somebody that hasn't invested in real estate before, maybe you just have a regular property, right? You get a mortgage on that property. That property is good for about 30 years, right? Most mortgages are about 30 years, and it's a little bit set it, forget it. The interest rates drops, maybe you'll refinance, otherwise, you might hold on to it. For those people that uh were able to get the the twos and the three percent mortgages, you might just hold that mortgage for the next 30 years and not deal with it. Well, in multifamily, it's a little bit different because you're not gonna get those same terms, more than likely. You might get something that, you know, it's it's very common that in five years that loan becomes due. So even if you have a property that maybe is amortized over 25 years or 30 years, the actual term on the loan might be something like three years, five years, 10 years, something like that. You might have an interest-only period, you might not. So there's lots of debt that's coming due, and it'll continue to come due. So even though we're in a great spot and we secured a great mortgage, you might have to go back and deal with that debt. And as we know, interest rates have gone up over the last couple of years. So people that have had great rates previously now have to deal with that. And so I just wanted to talk about what does that look like today and how can that help you find great opportunities in a market that is a little bit tougher to find great opportunities. And we'll talk about that. And a lot of the stuff that we'll talk about is stuff that we've had to deal with. It presents challenges, it presents some strategy changes and things that need to happen. Because, you know, when we go and we talk to investors and we say, hey, invest in this deal, the way things are two, three, four years down the road, as much as we try to put together our crystal ball and project out what's gonna happen, that's always not the case. And so things change, circumstances change, timelines change, and now debt changes and we've got to figure out what to do. So we're gonna talk about that today, cover some important things to help you guys so that you can find good deals and find investors for these deals and hopefully secure some some great opportunities.

Mike Swenson

First things first, I talked about refinancing, right? So, you know, let's say somebody bought a property five years ago, you know, here we are, end of, you know, towards the end of 2026. We bought a property end of 2021, interest rates were awesome, and uh, we got a five-year term, and now the bank's saying, Hey, what are you gonna do now? Uh, the term is is coming up on this loan. So it doesn't necessarily mean that something bad happened, you know, it's a uh an extremely uh tense situation. But if you think about what happens in life, five years is a long time, right? Things can change. And so it could be something where you know the owner got their loan at a at a better interest rate and now they've got a higher interest rate. Well, that mortgage payment's gonna go up, right? Just if I bought a bought a property, sold it, bought a uh more expensive property, you know, as our family got bigger and maybe our income got bigger, we've got a higher mortgage payment. So we've got that. That happens. The property values have changed over time, right? We're trying to increase income, decrease expenses. Maybe we weren't able to do that. Insurance rates got a heck of a lot higher. That landscape has changed a ton in the course of five years. Taxes, operating expenses, property management, growth of the property maybe hasn't followed suit with what you think was actually going to happen. So, in the course of five years, a lot happens. Also, when you're in a partnership with somebody, life changes in five years. If I go back to where I was at five years ago, right? My kids were much younger. We just recently got into this house. I actually wasn't that far removed from uh doing residential real estate instead of being an investor. Other people in similar situations now they've changed. And so partnerships might change, people might drift in different directions. So there's a lot of reasons why five years from or you know, five years ago to now, stuff has changed. And so it presents an opportunity. And so, what I want to remind people is you're here to help solve problems, right? It doesn't mean you know the building's on fire, it doesn't mean that there was um, you know, some landmine that went off. It could just mean life changed and we've we've got some different problems to solve. So there you get to step in and help solve a problem and meet a need and hopefully take advantage of a great opportunity. Uh, it doesn't mean that you know a person's going into bankruptcy or if they can't sell this property, the whole world's gonna end. It just means life changed, you can step in, you can help solve problems.

Mike Swenson

And so, like I said, we've experienced this. So when we've taken over properties, you know, we had somebody moving out of state, we had somebody looking to retire, we had somebody that was in over their head on a property and couldn't handle it. And so we were able to come in and bring a professional management situation into that. Somebody looking to scale up into a bigger building, right? There's people that are growing and we're growing too, but we're maybe a few years behind them. And so while that person's scaling up to something bigger and better, we're coming into something that's a great size for us. And so all these can be reasons why people are selling their property. Partnership, right? Just changed. Somebody grew in a different direction, somebody moved out of state, somebody changed jobs, and they're no longer focused on the same things that they're focused on. And so these are all great reasons why when that opportunity comes up to refinance the loan and and take care of their debt, you can come in and solve a problem and and take care of that and help somebody out. And so if we're buying a property, you know, a lender's gonna give a loan, let's just say, just for clean numbers' sake, a million-dollar property, right? Let's say they want 25% down. So that mortgage, you know, was for $750,000. And let's say over time, maybe that value hasn't kept up, and maybe the property value went down. Well, if it went down to say $900,000, the bank's now going to issue a mortgage based on 25% being down of that $900,000 loan. Well, there might be you have to put cash into the deal to be able to get that next mortgage. And so there's properties out there where, yeah, they haven't been able to increase the value like they thought they would. And so presents you with great opportunities to find those circumstances where you can bring value. We had another situation, I I've talked about this previously, where it was a bad relationship between business partners and they wanted to get out of business. And so they're not looking to, you know, fire sale the property, they just want to move on to their their separate ways. So find out what those scenarios are. And so we'll we'll talk next here on kind of how how to find these deals. But you're gonna want to ask those questions about, you know, not that not every broker, not every you know, person who has access to a deal is gonna share all that information, but look for ways that you can help. You know, try to try to get some some information on what's happening with that partnership and what's happening that with that relationship as to why they're selling, and maybe you come up with some creative ways to figure out. Now, I know when it's small multifamily, a lot of times when I was helping clients sell properties, the agent, the buyer's agent would say, Well, what's going on? You know, they're they're looking for the fire, they're looking for the bomb that went off. Um, you know, what are they hiding about the property as far as why they're trying to sell? And the reality is, is a lot of times that that's not the case, right? It's just something came up. And so ask those questions.

Mike Swenson

So who do we go to to find these deals? Real estate brokers, right? So if you you go onto some of these national websites and you look for property, you know, we're just talking about, you know, multifamily here. Um, if it's small, multifamily, maybe you find somebody with MLS access, find an agent. If it's larger, you're looking at some national websites to find out. And what you're doing is you're looking at potential properties, but you're not necessarily looking for that specific deal. So as I comb through apartment buildings for sale, a lot of times they're they're not fits for what I'm looking for, but I am finding out who's the agent or who's the person that owns that property. And you can reach out and develop a relationship with them. So whether it's a broker, it's an owner, principal in the company, whatever that might be, you can find a property that maybe isn't a fit for you size-wise, price-wise, location-wise, whatever that might be. And then go ask them the question, what else do you have? Can I get on your deal list? Can you send me opportunities that you might have down the road? And so, you know, what's the two best times to plant a tree 20 years ago and today? So if you haven't been doing that, you can start doing that. Um, that may not help with a deal if you're looking to purchase something here right away. However, top of mind is really important. I've had so many times where I have a great conversation with a broker or somebody who's sourcing me a deal, and for the next month or two, they might send me a bunch of stuff and then they don't do a good job with following up and I never hear from them again. However, doing that research, doing that that due diligence, reaching out to people can get some deals sent your way. Reach out to lenders, right? Lenders have a great idea of what loans are coming due and might have uh some situations that they know where somebody's needing to try to get a mortgage, um, a new loan, and might not be able to, or you know, due to all the reasons why I listed before, circumstances might change. So you can kind of maybe maybe find out some information from them. Property managers. Property managers are great people, they know the timing on stuff. I've talked with my property managers on our deals, they know when we're looking to sell. Um, right now we have a property we are looking to sell because we've added value that we expected us to do over the last couple of years. We've kind of reached that point and we think now might be a time to sell and have our investors uh be able to redeploy that capital elsewhere. So I'm talking to him about a sales timeline. They're gonna work on updating the property, maybe some new paint for the doors, maybe some new paint for the windows, make it look good for showings, update some of those things where the the curb appeal is important, but he knows we're looking to sell the property. So reaching out to property managers and seeing here's the type of property that I'm looking for. Do you have any that you know of where people might be interested in selling? They might need to reach out to the owner and get their permission to share that information with you, but that's a great resource for people. Um, contractors, right? If I'm looking to update a property to get it ready to sell, I'm gonna hire a contractor to maybe do some work on it uh before we go to sell. So you find some contractors. You know, if I'm looking for a commercial building in a certain area, try to go find who are the commercial builders or commercial construction companies in those areas that might be doing work on these properties. Other owners, right? They're they're connected to each other. Find out what else do you have? Who else do you know? Those are some great questions to be asking. Going to networking groups. So you're gonna do all those things to try to find what these opportunities are. When you find these opportunities from people, then you're gonna go ask those questions that we talked about before,

Mike Swenson

right? What's their situation? How can I help? And the reason why how can I help is important because you may not need to go get a brand new mortgage, right? There, there may be some opportunities, even though the debt's coming due. Maybe they can secure some financing and they might do some sort of seller financing or a seller carry back for part of that. They might be willing to help with that next situation. So we've had that happen a couple of times where as we're coming up into bigger properties, people who are more established have the assets, able to continue a guarantee on a loan. We've been able to take over those loans or work with them uh to be able to secure new financing for loans where we can essentially utilize the experience that they have, utilize that the assets that they have for guaranteeing those properties. So that's something that you can do, have some conversations with them, and then maybe you put together a plan. We we had a great uh great opportunity a couple of years ago where yeah, it was a seller that you know was was struggling with a loan, and we put together a new plan of here's how we take this to the next tier. And by bringing in some new capital, updating some units, it the finances make made sense for us at a higher interest rate than what they had. But because we were bringing in a lot of value to the property, the numbers worked at that higher interest rate because we were also increasing the occupancy of the property. So ask those questions, find out that information, build some great relationships, and I think through that you can you can try to try to find some good deals. Remember now we're talking about commercial multifamily most often here. So, you know, probably five units plus for some of these loans. But seller carrybacks are a great thing that you could take advantage of. So uh maybe they're willing to put together a loan. So I you know, going back to that example of a million-dollar loan, right, or a million-dollar property, seven hundred and fifty thousand dollar loan from the bank. So in that situation, I have to come up with two hundred and fifty thousand dollars to be able to secure that loan. Well, sometimes the bank, you know, they they just want to make sure that $250,000 is secured or is is put into the deal. A seller might be willing to finance $100,000 of that on a separate loan. Now, obviously, this all has to be on the up and up with the bank, and we want to make sure that they're aware of these situations. But if I bring $150, the seller helps finance $100, and then the bank puts together the $750, we're able to take care of that. And so I only have to bring in $150,000 instead of $250. Or maybe you only bring in $100 and the seller's able to do a carry back of $150,000 and you work out a separate payment structure with them. What's helpful for them too is they get to stretch out that payment or essentially that that capital gains over time. So instead of getting all the money at once, they're financing part of that over time. And so they stretch out that tax liability there. So it's advantageous for them. So that's where I come back to. We're looking to solve problems, right? Remember, solving problems is how you can win some of these deals. And so if I can help solve the seller's problem, it helps for me. So we've had a few properties where we haven't had to bring a full-down payment uh to the closing because we've had some seller carrybacks. And so, you know, once again, just taking advantage of people who have been there before, people who are trying to stretch out their tax payments or their gains taxes, and you can help each other out. So, as we're looking at connecting with people, we are connecting with lenders, connecting with the mortgage side, we're reaching out to our brokers, we're reaching out to our property managers, owners, and things like that. We need

Mike Swenson

to figure out what does make this a good deal, right? So just because we're buying it for less than they bought it for, right? Or whatever that might be, what constitutes a good deal in real estate? Well, there's a there's a lot that goes into it, and and we're trying to put our crystal ball together and predict the best we can what's gonna happen five years from now. Because if I get a five-year loan, I got to figure out how are we gonna make this so we don't get into a situation where we're gonna be stuck because of higher interest rates or the value is not there five years from now. So we wanna find what makes a good deal. So, real quick, if you if you haven't been analyzing deals, or this is your first one, or maybe you've done a couple or you've you know piggybacked off some other people finding deals and now you're finding your own. Here's what's important. Number one, we're looking at the market that we're buying in. Is this a market where the population is going up or the population's going down? If it's going down, what what's gonna happen is five years from now, there's gonna be a lot more vacancy in the city. We've looked at some communities in Minnesota where the population is pretty stagnant or it's going down. Well, if we fast forward five years, there's a couple of problems. Number one, there's not as many butts in the seats that are are looking for a place to rent. Number two, it also puts strain on what we're able to charge for rent. A big part of the strategy is we want to buy a property, increase the income, increase the rents. Well, if I'm increasing rents on my building and there's a lot of opportunities for them to live in other places in the city because the population is stagnant or decreasing, they're just not going to pay my rent. So if I charge, you know, let's just say $600 for a one-bedroom apartment or something like that, or two bedrooms wherever you're living in, um, and I try to increase the rent to $650 or $700. Maybe I made it look nicer. Maybe I updated it and legitimately did a good job. But that person staring at a $600 rent payment or a $700 rent payment, that $100 might be enough where they go walk somewhere else. They might be living willing to live in a less finished space or a smaller space because the $600 is what's most important to them. So that's where the population and the market is really important. So we're looking at populations where there's growth, where there's you know a housing shortage where we can hopefully five years from now see that there's gonna be continued demand there. So we're looking at who are the employers? Are those employers likely to stick around? Or is that person gonna you know farm off some jobs to somewhere else or sell the plant and move somewhere else? So you've got to be thinking about that because we want five years from now there to be more demand for my apartment building or my unit than there was five years ago. The property itself, right? We're looking at the location of that property, where is it located within the city or the community that you're at? Is it a good spot? Is it a place where people want to be? Does it have accessibility to public transportation? If there's public transportation there, what's the condition of it? What's the unit mix, right? Like so it might be a place where a studio apartment is really hard to rent. Maybe a one-bedroom apartment is really hard to rent. If it's two bedrooms, you know, that tends to rent pretty well. And so if I've got a building that's all studios, the numbers you know might work, but it's gonna be harder to rent out a studio. We've we've got an apartment building right now where all you know a lot of the studios that we have are are vacant. Now, in this case, the studios, you know, they they don't have a kitchen as much, a full kitchen, so it makes it tougher, right? So we're kind of scratching our heads trying to figure out how do we get rid of these studios. So you don't want to buy a bet uh apartment building that's all studios if there's no demand for studios, right? Um, so that unit mix is really important. And then the rent potential, you're looking at what can I reasonably charge a year from now, three years from now, five years from now, so that when your five-year loan comes due in five years, you've got a great situation on your hands. Obviously, net income is important, operating expenses, you know, how much money you have to put down. But I think the the market is really important, the population, what the appetite is for rent increases, and then obviously the condition of the property. And then, yeah, come back to once again, kind of why are people looking to sell? How can you solve their problems? So I think I've shared, you know, a few good examples from our own properties in terms of you know how we were able to get these deals, how we were able to structure the debt. And then the reality is for us, we're in the same boat five years from now as these people are today trying to figure out what we're gonna do with that debt. So uh really important. So I think uh, you know, as as you're out there looking, we're not looking just for distressed properties, we're looking to solve problems, we're looking to help people with the problems. And so the opportunity in real estate isn't necessarily finding the owner who's desperate to sell, but more it's about finding the person who's got a problem, figuring out how you can solve it, and create a win-win. And you know, that's where the real opportunity can be in in these situations. So find those people, build those relationships, figure out what's going on, find those great deals, and $300 billion in debt coming due, and it creates a great opportunity.

Mike Swenson

It's an opportunity for you to win. So if you're listening to this episode, if you've got questions, I also want to remind people I'm here to help. You listen to the podcast, you move on with your day. But if you need to reach out to somebody, I'm somebody that's that's always willing to talk and help people out. So if you're struggling, reach out on our website. We've got a booking link. You can book a call, 15-minute call, and I can you know help you out, help you move forward with what might be the next best decision for you. Um, so if you got any questions, do that. Otherwise, like I said, check out our website, freedom throughrealestate.com. Get you started, get you onto your next property, and we'll see you in the next episode and see you with the new deal that you found from taking advantage of what we talked about earlier.