Unlike many Real Estate asset classes that offer low initial cash flow, but promised upside, neighborhood strip centers provide 10% in-place cash flow in addition to healthy upside. By improving a shopping center’s visual appeal and bringing rents to market, great value can be achieved. Additional value can be created by selling off Quick Service Restaurant outparcels on the site, thereby returning significant amounts investor equity. Andy Thelan, Principal and Director of Capital Markets at The Criterion Fund, is acquiring strip centers in secondary markets in the $4 to $15 million dollar range and creating great value for investors. 

In the world of Alternative Investments, there are many ways to achieve cash flow. Bronson Hill, founder of Bronson Equity, has helped passive investors generate cash flow through different asset classes, including multifamily Real Estate. Many of these investments have done quite well, some have had challenges. Regardless of recent challenges, however, now is a great time to invest in multifamily properties as the market has corrected as much as 20%-30% on high quality assets. In addition to investing in equity, there are also opportunities to invest in debt with returns in the low teens, but with less risk. 

There are still thousands of small businesses that require commercial office space to operate. Despite the negative press of office buildings in large downtown markets, many small suburban office buildings are completely occupied. Adam Craig, Founder and CEO of CLE Real Estate Group, shops buildings that have languished on the market, sometimes for up to 18 months, and makes lowball offers to acquire them at a low enough basis to make money. These buildings are typically non-financeable, so there are often no competitive offers. Once the properties are improved, and stand out above the competiton, Adam finds tenants with local Facebook ads. 

Self-Storage has more resilience across different economic cycles. Whether people are downsizing or upsizing, storing expensive toys, or making space for a home office, they need to rent storage space. Increasingly, small businesses are also utilizing self-storage. A third of all Americans utilize self-storage facilities for various needs. In the right markets and the right locations, self-storage has a steady, predictable revenue stream with low operating expenses that results in high operating margins and profitability. Jacob Vanderslice, Principal of VanWest Partners, owns 19,000 storage units across 38 facilities in smaller markets with less competition and strong market fundamentals. Jacob has generated great returns for his investors in self storage over the past ten years. 

There’s great money to be made in Section 8, affordable housing. Occupancy is generally very high, and tenancies can last for many years. It’s a recipe for steady, predictable income and high margins. On the management side, however, it can be hard figuring out how to manage lower income, working class tenants, working with local governments to get paid, and doing it at a profit. It takes a special focus and very tight systems. Mike Bonadies, Co-Owner and Managing Partner at TerraVestra properties in rural Southern New Jersey, owns his own portfolio and manages over 900 units for other landlords. The properties in Southern New Jersey are often 100 years old, so in-house maintenance and construction are keys to Mike’s success. 

Although there are great benefits to investing in Real Estate equity opportunities for the cash flow, appreciation, and tax advantages, investing in debt can be a great alternative for more immediate, conservative and consistent cash flow. These vehicles generate anywhere from 8% to 10%, or even higher. In addition to Real Estate debt or equity, there are still other ways to invest in lending vehicles with even higher returns, as high as 20%. Matt Owens, Founder of Owens Capital Group, has flipped over 1000 single family homes and helps passive investors maximize the returns they get across several different asset classes while minimizing risk.

Now may be the best time to buy multifamily in several years.  As long as you can buy properties far below replacement cost with stabilized cap rates less than the cost of financing, you will make a lot of money over time. As the cost to build and the cost of land continues to escalate, inflation will continue to push prices higher and higher. As the prices of homes continue to rise, more people will need to rent. Because of high interest rates over the last couple years, there’s been almost no new construction.  As a result, there will be a major supply/demand imbalance by 2026/27 and rents will rise. Daniel Kattan, one of the founders of PIA Residential in South Florida, is buying value-add apartments in secondary and tertiary markets in Florida and other growing Southeastern markets.

To fully optimize the performance of a multifamily, you need in-house management. No one will fight as hard as you to be discilplined on expense management, tenant satisfaction, and upkeep of the property. It’s a commitment to build an in-house team, but the enhanced profitability makes it worth it. Brooks Mosier, Principal and co-founder of United Point Capital, is one of the largest buyers of single family homes in Kansas City, and has leveraged this experience into the acquisition of multifamily properties for his own portfolio. Brooks has syndicated the larger deals that require more equity and has brought in friends and family into his deals.

Older apartment buildings have perpetual upkeep and high expenses. Appliances, roofs, HVAC systems, plumbing etc. have limited lifespans, so there’s always unanticipated expenses. In new construction, you can control way more of the variables and therefore the costs and the profits. Roger Luri, CEO and President of LD2 Development in Chicago, and author of the book “Don’t Buy Multifamily! BUILD IT,” has been in construction since the late 80’s and has seen several challenges in operating older multifamily buildings across many market cycles. Roger has also built a range of new construction projects from apartments, luxury condos, new homes, to mixed use.  

As deals have gotten harder to find over the past several years, you have to find solvable problems in order to make deals that pencil. Finding these deals and having relentless focus on operations is required in today’s marketplace.   This focus on the nuts and bolt of operations mitigates risk. Further risk is mitigated by in-house management to make sure no corners are cut, expenses are managed tightly, and tenant maintenance requests are responded to promptly. Dave Codrea, Partner at Greenleaf Management, has built a vertically integrated company with incredibly conservative discipline that owns and operates over 120 assets across Multifamily, Mobile Home Parks, Medical Office and Flex Industrial.