Street Smart 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. 

One asset class that still has great deals on sub-institutional properties is Mobile Home Parks. Although larger parks near major metros are being acquired by REITs, Private Equity, and other institutions, parks with fewer than 100 sites are still being acquired by smaller investors with less competition. Smaller parks, mostly in tertiary markets, can offer great buying opportunities with value-add components that result in tremendous value and cash flow. Ferd Niemann IV, Mobile Home Park lawyer and investor, has acquired over 20 parks in mostly small markets across five Midwestern states. Ferd is raising a $10,000,000 fund to acquire more parks and leverage the success he’s had with individual assets. 

It’s hard to time the bottom of a market but real signs of distress are starting to appear in multifamily. Because of financing issues in addition to operational challenges, the market is starting to see forced sellers with lower prices. It’s once again becoming possible to acquire properties with positive leverage and potential upside over the next couple years as new inventory gets absorbed, occupancy increases, and rents rise. There are certain markets where job and population growth continue to serge and property values along with it. Dallas, for example, has 100,000 new residents still arriving per year, which will continue to put pressure on housing inventory. Daniel Farber, CEO of HLC Equity, has made significant investments in Dallas since 2012, and after an acquisition hiatus in 2021-2023, is starting to get back into the market. 

In a world where there’s so much money available to finance private Real Estate, there’s no need to employ your own capital as an investor. With creative deal structuring that solves other’s problems, you won’t need to come out of pocket to do deals, and you won’t need to deal with impersonal banks or other financial institutions. There are thousands of private investors and other sources of capital you can use for wholesaling, flipping, or buying and holding real estate, and these strategies are applicable in any size market. Derek Dombeck, Founder of GOW Global, has built his own portfolio of rentals and is teaching others how to implement the same strategies.

Many investors over the years have built portfolios of single-family rentals that have ultimately enabled them to quit their jobs and build legacy income for their families. Single family homes in the right neighborhoods can always attract good renters and some stay for many years with not a lot of management required. Dustin Heiner, Founder of Master Passive Income, has built a portfolio of single families in Northeastern Ohio, Houston, Tennessee and  Phoenix since 2006 and never sells a home. Dustin also offers a FREE Real Estate investing course online at masterpassiveinvesting.com. 

Alternative assets are getting a greater share of investor allocations as they seek higher yields and less volatility. Pension funds, endowments and other large institutions are directing more dollars to these assets in order to increase overall yields in their portfolios and to hit mandated returns. Kim Flynn, President of XA Investments and a Harvard MBA, specializes in Private Credit funds, some of which generate higher than 10% yields. Kim is responsible for all product and business development activities plus the firm’s proprietary fund platform and consulting practice.