Street Smart Success

After many years of escalating prices, it’s now a buyer’s market for institutional, quality multi-family assets. Institutions are on the sidelines as they rebalance investment portfolios, and it’s become much harder for newer operators to raise money. As a result, the buyer pool has shrunken, and prices have decreased. Class A, new vintage properties are selling for 10% off their peak in growing secondary markets in the Midwest. Ivan Barratt, Founder of the BAM companies, a fully vertically integrated Private Equity multifamily Real Estate firm, has close to 1 Billion in assets under management and has generated greater than a 35% IRR to investors with an average of a 3.5 year hold time. 

Unlike most Real Estate asset classes, the Mobile Home Park industry will not see high levels of distress caused by aggressive, short-term floating rate debt. Lenders of Mobile Home Parks are typically more conservative, and operators are not facing the same level of occupancy and expense challenges of other asset classes. Mobile Home Parks aren’t pretty, but they still consistently cash flow better than many other assets that are traditionally more sought after. Mario Datillo, CEO of Celebrate Communities, is buying Mobile Home Park communities in Florida, where he resides, plus Atlanta, Dallas, Minneapolis and Pittsburgh. Mario also publishes a lot of educational content for new Mobile Home Park investors.  Mario targets a 10% cap rate upon stabilization by year two and IRRs in the high teens.

Although the market for Multifamily still remains one of the most competitive asset classes, it still represents one of the best opportunities to add significant, predictable value in a relatively short period of time. Zach Winner, Founding Partner of Prosperity CRE, has had recent success in Kansas City where he 1031 exchanged out of an 80-unit apartment building into a 180 unit building and is brining units up to market rents. Zach is an opportunistic investor who is also undertaking a hotel-to-apartment conversion near Tacoma, Washington.

Many operators over the last couple years paid exorbitant prices for assets and have been unable to increase income as planned. Expenses have also increased significantly more than anticipated. These factors, combined with escalating borrowing costs, will make it very difficult for operators to hold onto certain properties.  As rates readjust upwards, there will be distress and opportunities for acquirers. Brian Estes, President of the Estes Group in Jackson Mississippi, has a background in repositioning distressed properties in the Gulf South states and looks forward to capitalizing on interesting opportunities on the horizon, especially Multifamily properties with 20-60 units. 

In major markets across the U.S., residential rents have shotten up dramatically over the past 10 years. As a result, many renters have moved further out from urban cores. For operators of apartment complexes, investing in markets outside of the urban cores has made sense because these markets have also seen rental rate increases, but the prices are less, especially for buildings with fewer than 100 units. Mike DesRosiers, CEO at Growth Capital Group, has acquired over 1000 units, mostly in secondary and tertiary markets in Texas. Mike started mostly in single family properties in the Bay Area prior to investing in these great cash-flowing markets.

When it comes to investing, nothing pays off more than patience and discipline. As sellers insist on prices that no longer make sense in this current interest rate environment, it’s gotten increasingly difficult to find deals that pencil out. Even before the interest rate surge, prices were at unprecedented levels because of the incredible amount of competition that were chasing deals. Andrew Cushman, Founder and Principal of Vantage Point Acquisitions, operators of multifamily assets in the Southeast, has adhered to strict acquisition guidelines and therefore has continued to prosper with his portfolio when many others are struggling.

When you invest your hard-earned money, it can make sense to have someone else vet opportunities for you to ensure success and reduce risk. When it comes to investing passively in Real Estate, there’s a lot to know, and there are countless opportunities to invest in. Many of these opportunities are valid, many aren’t. John Rubino, COO, Founder and Partner of JID Investments, helps investors avoid the pitfalls by steering them into well-vetted, trusted operators with strong track records and high ethical standards when it comes to how they handle investor’s money.

Short-Term-Rentals have exploded over the past several years and investors have prospered. Recently, however, several markets have gotten over-saturated, and vacancies have climbed. Appreciation in home values has also made these properties more difficult to cash flow. Kirby Atwell, CEO of Living off Rentals and podcast host of Living off Rentals podcast, has a different strategy for success. Kirby acquires properties in smaller markets. These are smaller, destination markets with far lower home prices, but nightly rates that are almost the same as major markets. Kirby has achieved financial independence for himself and is coaching others to do the same. 

Great locations save the day when broader markets go south. High density, infill markets with lots of employers and desirable amenities insulate properties from severe downturns which inevitably occur. Mark Hentemann, Founder of Quantum Capital, started out building a portfolio of 20–30-unit Multifamily buildings in Hollywood, CA and nearby L.A. neighborhoods. These properties appreciated considerably as he was able to bring rent-controlled, below market rents up to market. Mark has subsequently expanded to Austin and Denver with 20–40-unit buildings where he doesn’t compete with institutional investors.

Flipping houses can be a great way to make money, but only a handful of people are truly successful at it. There’s a lot you need to know and there are many ways to make costly mistakes. Roger Blankenship, Founder of FlippingAmerica.net, has successfully flipped over 1500 homes, but lost it all back in 2014 by expanding too fast, overextending himself, and having the wrong employees. Roger’s goal is to prevent others from making some of the same mistakes he made and to provide extremely valuable education on house flipping at an extremely reasonable price for new people getting into the business.