Street Smart Success

Investing in large metro markets mitigates a lot of risk compared to smaller markets. In these markets, it’s easier to find tenants, banks, contractors, and other resources necessary to operate Mobile Home Parks. Ryan Narus, co-founder of Archimedes Group, owns 85 Mobile Home Parks in the Southeast. To learn the business, Ryan moved into the first park he bought, and managed the property himself. Since then, Ryan has learned all aspects of running Mobile Home Parks, and has adapted to the many challenges that present themselves including dealing with an often-challenging tenant base.

Despite the negative press, there have been fewer than 1% of multifamily properties taken back by banks. Even with the tailwinds of late, including declining rents, higher interest rates and higher expenses, most borrowers are servicing their debt. In general, multifamily has proven to be a resilient asset class. With prices having come down 25%, now may be an opportune time to buy. The cost of single-family homeownership has gotten out of reach for most first-time homebuyers, and more millennials and Gen Zers prefer to rent. As a result, the rental pool is actually expanding. Oversupply is making occupancy numbers challenging, but new supply will be absorbed over the next few years. Neal Bawa, Founder of GroCapitus, is searching for multifamily projects to Invest in at the right price, and is also investing in Build-to-Rent communities. 

Transaction volume for multifamily is down 80% from its peak. Distressed owners are holding on as long as they can to prevent selling at a big loss while buyers are waiting for more seller capitulation, and the possibility of imminent rate cuts. In markets like Austin, new supply equals 15% of total inventory, so builders will eventually be forced to sell at steep discounts. For class C properties, where heavily leveraged bridge debt owners are unable to make payments, and they don’t have the money to rehab units, they will also be forced to further lower prices. Craig McGrouther, Director of Business Development for Lone Star Capital, is helping people invest in stable, cash flowing properties with in-house property management and conservative debt. 

Investors seeking truly passive, mailbox money are gravitating towards Single Tenant Triple Net Lease properties. When you have a credit tenant, and a strong long-term lease, you have very little to worry about when it comes to getting paid. If you’re in a larger metro urban area with limited land, or a growing suburb with high average income, your property will likely appreciate well over time and your investment will far outpace inflation. Like most asset classes, NNN is highly competitive, but there are great deals in the $2 million to $5 million range that are too big for a lot of small investors, and too small for larger institutions. Joel Owens, Principal Broker and Investor at NNN Invest, helps investors acquire great single tenant NNN properties, and also syndicates properties that passive investors can participate in.

As multifamily and office properties are struggling, more money is flowing into other asset classes, like Single Tenant Net Lease. Over the past decade, STNL has become a specialized asset class as more investors, including 1031 buyers, have sought a safe, predictable refuge for their cash. It’s also an asset class where you can buy institutional quality properties for as little as $2 - $5 million. Laith Hermiz, CEO of Ironside Realty, has built a career on forming strong relationships with the brokerage community, which has resulted in great deals for him and his investors. In the past year, difficult financing options have made it challenging for investors to acquire properties, thereby reducing the competition.  As the buyer pool has thinned out, the pipeline for new deals has increased for Laith Hermiz and Ironside Realty. 

We’re currently in the longest bull market in U.S. history as the government continues to print trillions of dollars. With this unprecedented situation, continued inflation and rising interest rates is unavoidable. Depending on what happens, it’s possible that rates can go as high as the high teens, like they did in the 80’s. This scenario will spur a declining stock market and depreciation on most assets. Jim Rogers, renown six-decade investor, author, and commentator, predicts choppy waters ahead and suggests that we take precaution. Jim was the co-founder of the Quantum Fund and Soros Fund Management with legendary investor George Soros. 

Since mid-2022, multifamily prices have plummeted over 30% and transaction volume is down 80%. Class C, in particular, has taken a beating. In the Class A space, sales volume is starting to pick up as owners are being forced to sell by lenders or institutional partners in advance of impending loan maturities. In most markets, rents have stopped their decline and beginning to stabilize. In addition, rates may be plateauing and ready to decline. As these factors come into play, and as new inventory gets absorbed, we may be near the bottom and on our way back up to a full recovery. Brian Burke, President and CEO of Praxis Capital, has been through several cycles, and believes multifamily will rebound in 2025 and 2026.

The woes of the office sector are pervasive and no secret. The work from home phenomenon, and the technology that enables it are clearly black swan drivers that have negatively impacted the sector. Apart from Class A+, trophy assets, the rest of the market is challenged, and even the market for trophy assets is nuanced. In some markets, where the culture is more supportive of in-person work, the office sector is actually doing well. Miami and Houston, for example. are performing quite well, National Director of office analytics for Costar, the country’s leading platform for CRE data analytics, shares his insights on the current state of the office sector.

We’re currently in the longest bull market in U.S. history as the government continues to print trillions of dollars. With this unprecedented situation, continued inflation and rising interest rates is unavoidable. Depending on what happens, it’s possible that rates can go as high as the high teens, like they did in the 80’s. This scenario will spur a declining stock market and depreciation on most assets. Jim Rogers, renown six-decade investor, author, and commentator, predicts choppy waters ahead and suggests that we take precaution. Jim was the co-founder of the Quantum Fund and Soros Fund Management with legendary investor George Soros. 

It may sound too good to be true, but it’s possible to become an investor in residential real with no money. If you have no savings but want to start a career in real estate investing, wholesaling houses is a great way to get started. With wholesaling, you can put properties under contract and assign them to fix and flip buyers at a higher price.  Jiries Dawaher, a real estate investor in Cincinnati, Ohio, has wholesaled over 1000 homes, mostly to house flippers. Since amassing a healthy net worth from this enterprise, Jiries has built a portfolio of 60 apartment rentals, plus investments in hotels.