Multifamily buildings started the year as a favored asset among real estate investors. While Brian Mond says that hasn’t necessarily changed, the funding picture does seem to have been altered somewhat by the COVID-19 pandemic.

“Apartment buildings seem to still be the sweetheart asset,” Mond, a director at Essex Realty Group, Inc. who focuses on the South Side of Chicago, told Chicago Agent magazine. However, he added that right now, “if I’m looking at it as an investor, it’s going to be tougher for me to buy a multifamily investment property.”

That’s because lenders are tightening their standards. Essex Realty surveyed more than 200 professionals at 20 top lenders for the Chicagoland multifamily market earlier this month and found that around 60% reported increasing timelines for funding deals, 40% said their company is requiring additional escrows, and 89% noted decreased appraisal values when compared to last year. Mond noted that reserves requirements are much higher than they were last year and that rehab and fix-and-flip deals are being hit especially hard. “Lenders are being more conservative with their value-add play,” he said. “It has been very tough for new buyers.”

Mond noted that, while it’s hard to predict where the market will be this time next year, the major determining factor will be twofold: market demand and balance sheet basics. On the one hand, would-be homebuyers sidelined by the current crisis will need to delay their plans to purchase. “If people can’t really buy new homes, they’re still going to have to rent,” he said. On the other hand, investor confidence in the multifamily market will definitely be impacted by what happens with rent nonpayment. “Really what it comes down to is occupancy and collections in the next six to 12 months. What’s that going to look like?”