One of the hottest real estate asset classes in the country is Senior Living. Occupancy levels have caught up and even exceeded pre-covid levels. 10,000 people per day are turning 80 years old and this number is increasing. The average age of senior facility residents is 83, so the number of people who will need some type of Senior Living is about to explode and continue for the next two decades. Matt Johnson, Founder of McFarlin group, acquires distressed properties, increases occupancy and profitability, then sells them. As the market has heated up, and the demographics support future growth, larger global players are investing in this space.

AirBnB can be a great business, but there’s been major oversupply in many markets. A glut of inventory has impacted occupancy levels and daily rates. One successful strategy to overcome competition is to operate larger properties with more rooms and greater amenities. There are far fewer of these properties and therefore less competition. Guests also tend to be higher end and less impacted by economic downturns. Larger properties attract wedding parties, reunions, golf outings, and other occasions where people travel in larger groups. David Gindin, Director of Development at WorkshopWDXL in New Orleans, converts existing multifamily properties into AirBnB’s and also develops projects ground up.

After several years of headwinds, including unprecedented levels of new supply, multifamily may be finally bottoming out. Supply is getting absorbed and new deliveries are declining. As new household formation continues to emerge, and home prices remain out of reach for most new home buyers, rental demand and rents will continue to increase. The long-term outlet is promising. As a result, multifamily accounts for 50% of large institution’s real estate allocation. Mark Hamilton, founder of Hamilton Zanze, manages over 25,000 residential units, making him one of the top fifty multifamily operators in the country. 

In today’s environment, multifamily valuations on stabilized properties are still too high to generate enough cash flow for many investors. By contrast, ground up development economics make more sense. California still has a major shortage of housing for middle wage earners, so the state encourages Build-to-Rent developments of affordable properties. Jared Jones, Co-founder of Middle Housing Partners, has a Private Equity fund that develops smaller multifamily, condo, or townhome projects that generate cash-flow and strong appreciation. These properties are in the California Inland Empire where demand for housing continues to outstrip supply. 

Although many sunbelt markets have been excessively challenged for multifamily, not all have been equally impacted. Houston, for example, has continued to see major job and population growth. Companies like Nvidia, Apple, and Foxconn have made large AI-related investments in Houston. Houston has one of the country’s major ports and Is the fourth largest city in the country. It is predicted to surpass Chicago as the third largest city in the U.S. by 2035. Sam Morris is a partner at LSCRE, a multifamily real estate company with a large presence in Houston. All of LSCRE’s properties are in Texas, 80% of which are in Houston, which is becoming an attractive market for institutional investors.

With the right asset classes and the right operators, Real Estate is a slow and steady investment vehicle, but can still entail risk. Over the past 3-5 years, many passive investors have lost money. The best way to mitigate this risk is to invest with experienced fund operators who vet the operators and the opportunities withing the fund for you. Great investors like Warren Buffet, Charles Munger, Howard Marks and others, invest in boring, predictable things they know will endure. Paul Moore, The “Boring Investor,” and Founder of Wellings Capital, is operating his eighth successful fund that invests across recession resistant asset classes.

The cost of land, borrowing, and construction has made it prohibitive to build new neighborhood retail centers in Florida. As a result, occupancy at existing properties in many markets is in the mid-high 90’s and sometimes even 100%. There’s a huge demand for space from restaurants, yoga and Pilates studios, gyms, massage clinics, plus other medical providers like dentists, chiropractors and joint clinics.  There are also many other tenant types that need retail foot traffic to survive. Todd Nepola, President of Current Capital Real Estate Group, has been buying retail centers in South Florida for 25 years and has generated great wealth for investors. 

With so much volatility and uncertainty in the world, it’s getting increasingly risky to invest in equity opportunities with long, illiquid hold periods. It’s too hard to predict what will happen over time, and we’re long overdue for a major market correction. That’s why investing in shorter term, no or low leverage residential loans can be a great way to generate a high, risk adjusted yield in today’s market. Jef Baker, Founding Partner of Black Butte Capital, specializes in making loans to fix and flip contractors in the Portland, Oregon metro where he lives. Jef gets to know the borrowers and properties in-person to mitigate risk and protect his investor’s capital. Black Butte also invests in their own fix and flip properties. 

Although multifamily has taken a big hit lately because of higher interest rates, higher expenses, and flat to declining rents, good deals are still hard to find. Sellers still want too much for their properties. Gino Barbaro, co-founder of Jake and Gino LLC, owns 1900 multifamily units in Knoxville, TN. Gino likes 2BR, 1.5 bath townhomes. Townhomes command more rent than apartments because they’re two stories with in-unit washer/ dryers and often parking. After years of trial and error, and investing in several valuable mentorship programs, Gino Barbaro has built an impressive, long-term multifamily portfolio with his partner Jake Stenziano. Gino also co-hosts the well-known Jake and Gino Real Estate podcast.

As light bay industrial continues to thrive, and other asset classes struggle, institutional money is chasing these deals. There’s still a shortage of supply, and new construction costs are prohibitive. Private equity, family offices, life insurance companies, and others are partnering with operators to generate yield. There is compelling value in secondary, under the radar markets. Many of these properties are owned by ma-and-pa operators with significantly below market rents and prices up to 50% below replacement cost. Grant Reaves, Managing Director and Co-founder of Stoic Equity Partners in Alabama, is acquiring value-add Flex Industrial properties in secondary markets in the Southeast.