The demand is out there, the money is waiting. But where are the sellers? Across the U.S., multifamily investors are facing increasingly difficult competition for a dwindling number of properties on the market. Allied Orion Group Chief Investment Officer Ricardo Rivas knows why.

The lack of deals is driving competition for the few that remain. The bid process is getting aggressive. Buyers are coming with hard money, looking to close quickly.

“If you don’t have your cash in the bank and are ready to close before your offer, it’ll be hard to close a deal,” Rivas said.

Sellers are sitting on properties when they are not getting the price they want, he said.

“Especially the newly developed assets. They cost a lot of money and effort. When you’re done and its time to take it to market, if you’re not getting the price want, you refi and wait to sell it for a price in line with your projections,” Rivas said.

Holding onto an asset is not without its risk.

“You have to balance that out. You can be worse off because of the structure of the capital,” Rivas said.

He said the market should recover in 2018. He expects trade volume to pick up in the next 12 to 18 months. The macro data suggests multifamily is still supported by strong economic fundamentals. While the national vacancy rate for multifamily property is projected to increase to 5.6% in 2017 and to 5.7% in 2018, according to CoStar, these figures are still below the 15-year average vacancy rate of 6.1%.

Deals are still getting done.

“The properties that are trading are the ones where the equity is looking to exit, encouraging a sale,” Rivas said. “The properties that are trading are value-add or older Class-As.”

Many investors are not liking what they find.

“Value-add is picked over big time. What’s left is deep value-adds, like working on roofs, HVAC systems. You’ll get better pricing but then you’re getting into B assets. By the time you put the money in you’re at the price of an A asset.”

“There’s just not a lot of meat on the bone for value-add,” Rivas said.

Still, he sees a clear future for multifamily investing. Housing starts are at historic lows, fewer homes are available for sale than in any previous cycle and the cost to build is climbing, especially with the recently implemented tariffs against Canadian softwood lumber imports. The recent and continued rise in interest rates make it more challenging for people to purchase homes. All these factors will redirect prospective buyers back into the rental population, helping multifamily maintain its status as a safe and stable asset class.

Multifamily remains the largest asset class within real estate investing. When high-profile institutions actively build then sell in the short term, and lenders begin to murmur about too many apartments, it is important for private investors to remember that buying and building rental properties is not a market-timing game, but one of strong underlying fundamentals, he said.

Hear more from Ricardo and 30 other speakers at Bisnow's Big South Multifamily Event.