Street Smart Success

The multifamily business is a people business that is operationally intensive and requires experienced business acumen. To be successful entails great systems, winning teams, excellent customer service, and a disciplined marketing strategy. Ral West, serial entrepreneur and business mentor, has invested as an LP and co-GP with other sponsors in over 6000 units across 23 deals. Some of these properties are performing better than others. Ral has background in the chartered cruise ship and chartered plane business prior to investing in multifamily syndications. She also is a mentor to other business owners to help them systematize their businesses so they can escape the day-to-day toil of running a business.

Success is a poor teacher, we learn more from our failures than our successes, The key is to be resilient and adaptable. After starting over 70 companies, most of which didn’t make money, Damion Lupo is experienced with the ups and downs of entrepreneurship. His latest endeavor, Frametech, is streamlining and revolutionizing the home construction industry in order to solve the housing shortage. Damion is also the founder of eQPR, a platform and community that helps people self-direct investments in their IRAs into alternative investments not available on Wall Street. 

Most new businesses fail within their first five years. That’s why if you’re considering going into business, investing in a franchise can be the best option. Investing in a successful franchise mitigates a lot of risk by aligning yourself with a proven concept and a leadership team that teaches you the operational components of the business and how to become successful. There are over 3000 franchise concepts in the U.S., both brick-and-mortar and service business you can work full or part time. Greg Mohr, the Franchise Maven, is one of America’s leading franchise consultants. Greg matches people with vetted franchises that fit their strengths, experience, and personalities.

The multifamily sector is facing major headwinds. Not only have interest rates escalated at an unprecedented pace, and are not going down, but operating costs have also soared. In certain states, insurance costs have increased 100%, or even more in the last few years. Chris Grenzig, Owner of Jag Capital Partners, has built a vertically integrated portfolio of smaller properties in Jacksonville, and has recently expanded into third party property management. Chris brings his wealth of experience in managing his own properties to his third-party clients.

Investing in single family dwellings and three to four-unit apartments can generate cash flow and appreciation, but it’s become more difficult over time to find good deals, and they tend to be time consuming to manage.  If you want to better leverage your time and capital, it can be more profitable to invest in larger syndications. Dan Rowley, General Partner of Spark Multifamily Investment Group, has migrated from smaller deals to syndications up to 50 units over the last couple years. Dan has also been a passive investor in 30 deals. Most of these deals have performed according to pro forma, some, have performed even better. 

A great sector of Real Estate investing with a low barrier to entry is land flipping. Land flipping requires little start-up money, and the profits can be incredibly lucrative, with very little downside. There are millions of vacant land parcels in the United States. Mike Deaton, a successful land investor, generates as much income from land investing as he and his wife made combined in high-paying corporate salaries. Buying and selling land is easier than investing in houses, apartments, or other commercial buildings because it’s just land with no physical structure. After becoming very successful flipping land, Mike is now coaching others on how to replicate his success.

A new apartment building is at its highest value upon completion of construction. Like a new car, it’s a depreciating asset. That’s why you need to invest with operators who have a lot of experience with all aspects of the business to make money.  Most syndicators are finance professionals, not operators.  Most of the appreciation of multifamily over the past couple decades has been the result of declining interest rates, which will most likely not be repeated in the near future. Isaac Bennett, Founder of You Are, has invested in multifamily both as a Limited Partner and Principal, and has learned the hard way the critical importance of working with top-notch operators. Isaac is a multifamily investor and also develops land and invests in other alternative investments. 

Aside from the merits of the real estate itself, financing is the other critical component that makes or breaks deals. Securing capital, and how it’s structured, is the underpinning of the deal, and can determine whether the property will be able to withstand fluctuations in the operations, market, and unforeseen economic occurrences. Eric Brody, Founder & Principal at ANAX Realty Partners, utilizes data analytics to guide clients through the intricate process of debt and equity, asset revitalization, restructuring and recapitalization. Eric works with owners, investors, and developers to navigate the financing of deals.

Although there are challenges in the multifamily space in certain markets, some markets are still flourishing, and the longer-term fundamentals are strong. Demand is still growing, and supply Is not keeping up with demand. Currently, there are great deals being sold by developers on newly constructed properties at below construction cost. This is a once in a decade to fifteen-year opportunity. Michael Zaransky, Founding and Managing Principal of MZ Capital Partners, has been acquiring newer properties in Texas, Tennessee, and his home city of Chicago, and capitalizing on this rare opportunity.

Although the stock market is trading at all-time highs, it can go higher as investors reallocate money from underperforming bonds and Commercial Real Estate in particular. Many investors specifically prefer allocating much of their portfolio to the S & P 500. Warren Buffett, one of the greatest investors of all time, instructed a trustee to invest 90% of his cash in an S&P 500 index fund and 10% in short-term government bonds. According to Buffett, the market has gotten too efficient and claimed, “there are no bargains out there.” The S & P has shown remarkable predictability, resilience and appreciation. Bob Wiedemer is a Senior Investment Advisor at Bull Bear Investment Management, who helps his clients invest in S & P 500 index funds. Bob is also the Author of New York Times and Wall Street Journal Bestseller Aftershock and Fake Money, Real Danger.