Street Smart Success

Current events and policy will determine inflation levels and interest rates that effect our broader economy and Real Estate values and investments. Volatility around tariffs and other decisions will make a significant impact that effects all sectors of our society. Greg Makoff, Senior Fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, and author of Default: The Landmark Court Battle over Argentina's $100 Billion Debt Restructuring, has multiple decades of experience in the world of debt and how it impacts societies and individuals. Greg sees our current political environment and lack of a clear strategy as a major threat to our economic well-being. 

Although prices have come down as much as 30% or even higher on Class B and C Value-Add multifamily, they haven’t come down enough for most seasoned investors to want to jump back in. There still needs to be further concessions to make the deals pencil, and to be worth the risk entailed with value-add. Buying and selling land in growing markets, however, can generate very attractive rates of return at far lower capital entry points. John Cohen, Founder of Toro Real Estate Partners, sold off most of his portfolio of 4500 multifamily units from 2020-2024, and has been acquiring land and selling to single family builders. 

Investing in real estate syndications from 2015 – 2018 resulted in highly positive outcomes, including major appreciation and double-digit returns, often times as high as 30%-40%, or even higher. Investing in 2020 to 2022, however, may have yielded vastly different results, especially if you invested in Multifamily. Too many sponsors took on highly leveraged bridge debt and got buried when rates escalated. Sam Giordano, MD and Real Estate Investor, started passively investing in syndications in 2017 and enjoyed great wins, but also some valuable lessons along the way. Sam has recently developed the LP Deal Analyzer, a platform that analyzes deals with the power of AI to help other Limited Partners make better educated decisions about what deals to invest in.

There are many alternative investments you can invest in, but one centuries-old asset class almost no one knows about is claims investing. When companies such as Sears, American Airlines, Big Lots, or even Madoff Investment Securities owe billions of dollars, investors can invest in the claims against these entities and generate outsized returns without excessive risk. Joe Sarachek, a successful attorney and investor, is one of the foremost authorities in the trading of privately held distressed debt. Joe is also an adjunct professor at NYU’s Stern School of Business, and has recently written The Distressed Investor Playbook where you can learn how to profitably invest in distressed assets.

Most of the problems in multifamily right now are related to debt. Many operators are in their second extension phase and not making payments. Several of these are giving their properties back to the lender. These lenders in turn are looking for experienced operators to take over the properties.  James Eng, “The Professor” of multifamily financing, is the National Director at Old Capital in Dallas. James has helped hundreds of multifamily investors strategize the right debt to obtain and acquire over $1 Billion dollars of properties. James has also been a Limited Partner in 45 multifamily deals in Texas. 

After a forty-year honeymoon of plummeting interest rates, it’s going to require a lot more operational skill moving forward to generate positive returns in commercial real estate. Although we’re going to see increased distress over the next several quarters, operational expertise will still be required to achieve desired returns. This is especially true in multifamily because of the daily demands of the asset class. Mark Hamilton, founder of Hamilton Zanze, manages over 25,000 residential units, making him one of the top fifty multifamily operators in the country. Mark has achieved both income and growth over the past several decades for his investors while utilizing fixed rate debt and conservate underwriting.

How deals are capitalized can make the difference between success and failure. This is why there’s a need for loan consultants. The process of determining and sourcing the right financing can be complex, so the services of loan consultants can be critical. Tripp Greene, Founding Member of Trinity Capital, helps investors navigate the lending landscape to identify the right source of financing that makes the most sense for a particular deal. Tripp also founded the Coast-to-Coast Real Estate Academy to teach investors and other Real Estate stakeholders how to start their careers in Real Estate. 

The growth of private market investing has taken off over the past few decades as returns have proven to be better over the long term. Fewer companies are going public these days and they’re staying private longer. Part of this growth of private market investing has been driven by large family offices. The number of family offices has increased ten-fold since 2008 and now stands at around 10,000. These offices invest for the long-term and therefore prefer alternative private investments because they’ve outperformed the public market. Ron Diamond, an expert in family offices, is Founder and CEO of Diamond Wealth and Family Office World Media. Ron invests alongside over 100 Family Offices in private equity, real estate, venture capital, credit, and special situations.

Many people are taught that the best way to achieve financial security is to build a nest egg through stocks and mutual funds. Most Americans, however, even after following this advice, do not have enough money to retire and achieve financial independence. This is because the returns on these vehicles is lower than 10% on average per annum, and they generally don’t produce income apart from low single digit dividends. Chris Miles, a cash flow expert and founder of Money Ripples, teaches people strategies on how to invest their earnings into passive income.

So many people are chasing value-add multifamily deals, that the deals rarely pencil. On the construction side, it’s also become difficult to achieve profitability because of prohibitive costs including higher interest rates. At the same time, the need for housing continues to outpace supply in many markets. One way to be successful in this environment is to partner with municipalities in Tax Increment Financing deals. With Tax Increment Financing, municipalities subsidize construction costs for the developer, thereby lowering the barrier to entry. Justin Goodin, CEO of Goodin Development, is partnering with municipalities in Indiana to build luxury, Class A apartments.