Street Smart Success

If you’re entrepreneurial and looking for a way to generate a lot of income with little initial capital requirements, flipping homes is an age old, timeless formula. It just requires courage and tenacity that many don’t have. There are always distressed sellers and hidden opportunities in any market cycle and any market. Tony Youngs, Owner of Real World Enterprises, has been flipping houses in Atlanta for decades that he buys directly from sellers, and teaches others how to bypass the high-stakes competition of the MLS and auctions.

In Real Estate, and multifamily in particular, you need to have boots on the ground to ensure things are running as expected. It also helps to live in the market in order to have intimate knowledge of the investment. This is one way to mitigate risk. Multifamily is a 24/7 business, and too many things go wrong when you’re managing from afar. Dustin Miles, Managing Partner at Momentum Multifamily, has 1600 units in Houston where his partner lives, he is also looking to acquire in Dallas where he lives. He believes prices have finally come down enough in Dallas to start looking for properties there.

The forecast for industrial real estate is bullish in growth markets for the foreseeable future. As long as you can buy the right properties, and don’t overpay or overleverage, it’s a recipe for success. Single tenant properties, in particular, have management efficiencies that make them particularly attractive. Brent Leiberman, Founding Principal at Levelan Partners, acquires and develops well-located properties with interstate proximity in select markets in the Midwest and Southeast. He acquires properties less than 150,000 s/ft to avoid competing with larger Private Equity and Institutional buyers.

Buying properties in tertiary markets with five to ten thousand residents within a 30–40-minute drive from a larger city can generate outsized returns. Often times long-time owners in these markets aren’t aware when their rents are significantly under market, and they aren’t current on what their properties are worth. Farris Gosea, Founder and CEO of Farris Gosea Capital, has amassed a large portfolio of multifamily apartment buildings in Northwest Indiana and Southern Michigan. Farris has built a vertically integrated company that controls all aspects of maintenance, construction, and leasing. 

Despite the escalation of asset prices over the past decade, there’s still great value In Midwestern tertiary markets. In multifamily, you can still buy properties for $65,000-$75,000 per unit that generate strong cash flow. Although these are small markets, many of them have strong and stable employment fundamentals, and therefore consistently high occupancy levels. Stan Remling, Partner at Follow the Deal Investments, has accumulated a portfolio of 700 units over the past few years within a two-hour drive of Indianapolis. 

There’s a big difference between investing and speculating. Speculating is exciting. Investing is less exciting, but more predictable over time. Great investors like Warren Buffet, Charles Munger, Howard Marks and others, are boring investors. With the right asset classes and the right operators, Real Estate is a slow and steady, boring investment vehicle, but can also entail risk. Over the past couple years, many investors have lost money. One way to mitigate this risk is to invest with experienced fund operators who vet the operators and the opportunities for you. Paul Moore, The Boring Investor and Founder of Wellings Capital, is operating his sixth successful fund that invests across recession resistant asset classes.

Apart from Real Estate, there are many private placement vehicles to invest in, including Oil and Gas, pre-IPO companies, and many others. Some of these opportunities are less well known, but present higher returns than commercial real estate. Marshall Sykes, Founder and Owner of Capitano Investing Group, has been involved in over 20 syndications across multiple asset classes. After some initial wins, and some crucial lessons in Multifamily, and as an ex-Exxon executive, much of Marshall’s current focus is on the lucrative oil and gas sector with existing wells and proven production. 

Given pricing corrections over the past couple years, some of the best mid-market multifamily deals in the last decade are now being acquired at well below replacement cost. There are more buyers that need to sell and there’s less competition for these assets than higher priced deals that attract larger institutions.  Cameron Croy, Director at Walker & Dunlop Investment Partners, helps deploy both debt and equity capital across Multifamily and smaller bay Industrial, two juggernauts in the commercial real estate category. 

*This presentation is for informational purposes only. Nothing herein is an offer or solicitation for the purchase or sale of any security and may not be relied upon in connection therewith. Private real estate investments involve risk of loss; past performance is not indicative of future results. WDIP investment strategies are available only to sophisticated accredited investors. Any opinions and forward-looking statements are that of the presenters are subject to change.

Submarket-specific focus, complete vertical integration, and 20 years of experience mitigates a lot of risk. Chicago has been the number one market for multifamily rent appreciation in the country over the past couple quarters. Rents to average income are considerably lower than most other large markets and there are several Fortune 500 and large tech company employers. There’s also been limited new construction compared to other growth markets. Michael Root, Partner at Root Property Group, has built a successful, fully integrated portfolio of 700 multifamily units in the city of Chicago.

Prices on most value-add workforce class B and C multifamily properties are too high to execute successful business plans. Construction costs have escalated and obtaining higher rents is not a certainty as renters are being squeezed by inflation. Rob Beardsley, Founder and Principal of Lone Star Capital, started with workforce value-add multifamily, but has pivoted to affordable housing with mostly later vintage properties. Rob partners with non-profit entities, including municipalities, to receive tax abatements in exchange for protected rents for tenants. As a result, he’s able to generate aggressive investor returns while providing much-needed affordable housing.