Sam Bates joins us to discuss the ins and outs of ground-up multi-family development. Sam shares his wealth of knowledge on the topic, from understanding why one might want to focus on this type of investment to protecting potential downsides when structuring purchase and sale agreements. He explains how they find and entitle land, analyze the market, and decide what properties to build on raw land parcels. He also covers how they use third-party market studies to make informed decisions, negotiate with sellers, how relationships with cities and counties come into play, and more. Plus, Sam shares his insights on rising interest rates and debt costs that affect new developments, competitive advantages in investing in real estate due to population growth, and demand for housing across the country. Tune in for a wealth of information for those looking to invest in ground-up multi-family development.

 

[00:01 - 06:28] Discovering the Benefits of Ground-Up Multi-Family Development

Cap rates and interest rates have decreased over the past 40 years but are starting to rise again

Ground-up multi-family development can create a lot of value for investors and developers

Investors with different time horizons should consider other types of investments

The minimum median household income for ground-up multi-family development should be 70,000

 

[06:29- 16:28] Navigating the Complexities of Developing Multi-Family Properties

BG and other market study providers can show supply and demand characteristics

It is more difficult to find land to develop than to acquire an existing property

Landowners often need assurances that progress is being made to negotiate a purchase and sale agreement

 

[16:29 - 23:36] Navigating the Challenges of Increasing Interest Rates and Costs of Debt in Real Estate Development

Flexibility and willingness to pivot during development are key

Class A properties use top-of-the-line materials, such as quartz or granite, and stainless steel

Property taxes in Texas are very aggressive

Increasing costs of debt will impact new development, and investors should expect lower returns

Multi-family has a competitive advantage due to access to financing and population growth

 

[23:37- 28:49] Closing Segment

Best investment ever made: the development in the 3000 population market

Worst investment ever made: doing single family all by himself

The most important lesson learned: being decisive

Connect with Sam through LinkedIn, or visit www.BatesCapitalGroup.com/invest. 

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Quotes:

 

"If you have a longer time horizon, if you're more geared or inclined to take on, I won't even say risk, but just longer time horizons development's the way to go." - Sam Bates

 

"Sometimes too much debt is a detriment, but we do get 60, 70, 80% financing at fairly cheap money, especially compared to pre-for investor expectations." - Sam Bates