Street Smart Success

In highly desirable, steady markets not subject to excessive volatility, Real Estate values tend to hold and appreciate consistently over time, and are great, low risk capital preservation assets. One such market that has withstood the test of time is Chicago. Chicago remains a powerful magnet that attracts residents from all over the greater Midwest and beyond. Joe Smazal, Senior Managing Partner of Interra Realty, is one of Chicago’s top-producing Multifamily brokers in the $5-$15 million range and is building his own portfolio of Multifamily assets.

If you’ve been paying attention at all, you know there are clouds on the horizon in Commercial Real Estate. This is caused in no small part to escalating interest rates, which can move even higher. Amongst asset classes facing headwinds is multifamily. Depending on the market, there’s a glut of new construction, rents and occupancy are down, and expenses are up. As a result, many apartment complexes acquired over the past two to three years with floating rate debt will not get refinanced, which will translate into great deals for patient investors. Darin Garman, The Nations Most Trusted No BS Multi-Family Investment Advisor, has been in Multifamily for decades, and predicts great opportunities over the next six to 18 months.

Investing in the right operator is more important than investing in the right deal. A poor operator can make a good deal bad; a good operator can make a bad deal good.  When selecting who to invest with, it’s important to vet how often, how much, and what they communicate, in addition to making sure they’ll prioritize the operations of the deal before they move on to other deals just to reap the acquisition fees. Nancy Chillag, Founder of 23rd St. investors, partners with other General Partners that are aligned with her goals, morals, and operating principles to generate consistent returns for investors. 

You don’t need to be a direct operator of Real Estate to get a great return on your money. You can invest in the secondary mortgage market and get conservative, mid-high teen returns with almost no leverage against single family homes. Bill Bymel, CEO and fund manager of First Lien Capital, invests in pools of mostly non-performing single-family notes at a discount and a conservative loan- to-value of 60%. First Lien owns over 700 mortgages valued at greater than $100 million.  They help borrowers get the loans back into performing status and then resells them to other investors.

It’s hard to find businesses that consistently generate profit margins in excess of 20%. One such asset class most investors don’t think about is laundromats, but they’re everywhere and simple businesses to run. Over the past couple years, Real Estate investors, in addition to others, have entered the laundromat space because of the strong cash flow and the ability to dramatically increase revenue by adding value. For starters, most laundromats lack the simple technological advances that make these facilities way easier to run and way more profitable. Jordan Berry, Owner of Laundromat Resource, has successfully operated numerous laundromats in Southern California and is now creating a fund that investors can passively invest in.

To be successful in the long-term in Real estate, you need to buy things right at today’s value versus hoping the market will carry you, because the market is undependable. The market has carried a lot of investors over the past few years, even when they overpaid for properties, but these days are temporarily over. We’re currently in a Real Estate recession as lending has all but shut down, but great deals are starting to present themselves because of skyrocketing borrowing costs for borrowers with floating rates.  AJ Osborne, CEO of Cedar Creek Capital, has built a $300 million-dollar Self Storage portfolio by turning around underperforming assets in high-demand markets with long-term fixed debt. Cedar Creek Capital is completely vertically integrated, buys and holds, and has returns that far exceed 20%.

Finding a new niche in an increasingly crowded marketplace is close to impossible. One asset class which has yet to be scaled, however, is laundromats. Laundromats are run mostly by small operators with antiquated systems, often in outdated facilities. Sam Wilson, a successful Real Estate investor and entrepreneur, is acquiring laundromats and modernizing. He’s achieving huge revenue increases and profitability in the process. Sam created a fund where investors can participate in this trajectory of success.

Hyper-focus is a key to success in business. In Real Estate, having a tight geographic and operational focus pays high dividends, especially in the Multifamily sector. There’s no substitute for living in the market you’re operating in, where you have intimate knowledge of the neighborhoods, blocks, and even the streets. On top of this geographic specialization, if you’re truly vertically integrated, the odds are highly stacked in favor of your success. Jered Sturm, Principal and CEO of SNS Capital Group, has had amazing success improving the performance of C and C+ properties in Cincinnati, Ohio where he’s lived his whole life. 

One of the critical components in Real Estate acquisitions is the lending piece. The wrong loan can end up dooming a project in the long term. Getting the right loan product with all the right terms and conditions for your investment can make or break the deal when unforeseen circumstances occur. Malcom Turner, President & CEO of Castle Commercial Capital in Detroit, helps commercial borrowers navigate the complex landscape of commercial lending so they can close on the right deal and avoid common pitfalls down the road. Malcolm is also the author of “Financing the Unbankable Deal: How to buy commercial Real Estate with the Bridge Loan Investor Success Strategy”. 

Most real estate classes require a lot of hands-on daily management that makes or breaks the success of the investment. Nowhere is this more the case than multifamily apartment communities. When you’re dealing with tenants 24/7, there’s things that need prompt attention at times.  Ryan Weiss, Principal Broker and Managing Partner at Blue Door Living, has gone from managing 40 units to over 400 units in just three years and has gotten all his clients by word-of-mouth. Ryan is based in Manchester, New Hampshire, a chronically under-supplied market just an hour north of Boston.