Street Smart Success

Although asset prices have declined over the past couple years, we still may see further reductions, especially with the possibility of another recession. If oil prices spike, or we have another major stock market correction, a recession will likely follow. As it stands, global instability, and the Middle East in particular, can cause a spike in oil prices that impacts the market. Domestically, we’ve had the longest inverted yield curve in our history, which may be a likely precursor to the next recession. For these reasons, patience may pay off in determining when to make your next investments in alternative assets. Jeremy Roll, a successful 20+ year full-time passive investor, anticipates further concessions in asset prices with higher cash flow and better returns, and is therefore currently on the sidelines.

The national debt has climbed to nearly $35 Trillion dollars. Many economists believe this will produce unavoidable inflation and increased interest rates. As of this year, however, U.S inflation has been largely tamed and come back down to historical norms. This has largely been the result of global supply chains opening back up, and the overall impacts of globalization. Richard Duncan, author of “The Money Revolution, How to Finance the next American Century,” has a prescription for future growth and prosperity that entails investing in industries and technologies of the future that will cement U.S. geopolitical preeminence. Richard is also the publisher of Macro Watch, a video-newsletter that analyzes the forces driving the economy and the financial markets in the 21st Century.

There are many investment opportunities to generate cash flow, but few are as safe as low leverage Hard Money Loans against single family homes in strong markets. As long as you have an experienced operator who knows how to value the properties, vet the borrowers, and administer other aspects of the business, your investment will be safe, especially if it’s a conservative return. Michael Joseph, Partner at First Bridge Funding, has a $300 million dollar fund against California single family homes at 65% LTV. Michael has never lost investor money. He also owns a chain of Planet Fitness gyms and real estate holdings, including small bay industrial properties. 

In the past decade, Credit Unions have become more mainstream and a common source of commercial lending. As consolidation in the banking industry as depleted the number of community banks, Credit Unions have been filling the breach. Credit Unions are non-profit entities owned by their customers, or “members.” They’re easy and flexible to work with and often have lower fees and lower borrowing rates. They offer no pre-payment penalties on commercial loans, they have less stringent approval requirements than banks, and may be more willing to accept applicants with less than perfect credit. 

Getting the right price and the right terms is the ultimate hedge against the inevitable unknowns and challenges of operating multifamily properties. Class C properties, in particular, can present great buying opportunities, but they have a lot of day-to-day operational challenges, from collecting rents to perpetual maintenance issues. Steven Weinstock, co-founder of WE Capital in Brooklyn, operates C and B class properties in Cleveland and Louisville. Steve is acquiring these properties from forty to eighty thousand dollars/per door from long-term owners. 

50% of multifamily property management fees are generated through maintenance work. Property management firms markup maintenance as high as 50%, and don’t provide clients itemized expenses. Some companies even charge vacancy fees. They make money on revenue, not on reducing expenses. Brian Levredge, President of Pinnacle Asset Management, manages his own properties in Chattanooga and surrounding areas. Rents in these markets have not experienced the declines of other Southeastern markets. Brian also manages properties for other owners with full transparency and straight-forward fee structures. 

Despite headwinds that have buffeted the multifamily industry over the last couple years, certain markets have continued to flourish. New England, for example, has continued to excel because there’s been an influx of new residents and limited new construction. As Boston rents have become the second highest in the nation behind New York, it’s pushed many of these renters to move to Southern New Hampshire and other New England markets. Axel Ragnarsson, founder of Aligned Real Estate Partners, acquires apartment buildings in New England at steep discounts by going direct-to-seller.

As passion for sports persists, the sports industry has shown major growth over the past several decades. It’s not just the teams, it’s the entire industry and ecosystem that supports them. Whether it’s food and beverage, merchandising, broadcasting and media, or even sports betting, sports are booming. In addition to the NBA, MLB, NFL, and NHL, sports like soccer and women’s sports are growing rapidly, not to mention the growth of youth sports. Nick Edwards, Founder of Venture Champion Partners, is raising a fund that provides access to retail investors to participate in this booming asset class. 

As banks have become more regulated since 2008, and more risk averse because of economic uncertainty, the private lending market has grown tremendously in recent years. Whether it’s Real Estate operators who need to come up with more money to refinance their loans, or smaller private companies who need funding to grow their businesses, Private Credit is growing dramatically to fill these roles. Jeremey Hill, Founder and Managing Partner of JB Capital, provides $2 - $5 million loans to Commercial Real Estate operators plus loans to small to mid-size businesses in the Health Care, Technology, and Business Services sectors. 

Starting in 2012, Blackrock started investing in single family homes. This was on the heels of the great financial crises when newer homes in Phoenix and other sunbelt markets were selling for $60,000-$70,000. Since then, other institutions have also entered the space, and single-family homes has become an institutional asset class. Kris Garin, Principal and CEO of Riparian Capital Partners is aggregating an impressive portfolio of government-subsidized affordable single-family homes in Baltimore, Detroit, and Pittsburgh, and will also be expanding to other cities. Riparian Capital Partners currently owns 1600 affordable single-family homes.