Street Smart Success

Even though the U.S. economy is in a state of flux and there are other domestic and global uncertainties, trends continue to be in favor of growth in the South and Southeast in terms of population job growth and migration. The rate at which this is occurring is unparalleled and opportunities for solid investments in multifamily real estate will continue to present themselves. Charlie Young, Partner at Madera Residential, has been in the business for over three decades and has over 12,000 units in his portfolio. Charlie believes we’ll be in a recession by the end of the year, but that will present great buying opportunities in 2023 and 2024. There’s 5 trillion dollars in Private Equity in this country waiting to be deployed and digital Real Estate planforms like Crowd Street is bringing new investors to the table that will continue to put upward pressure on prices in the years to come.

You hear a lot about value add Real Estate in terms of creating value in acquisitions these days, especially as prices have skyrocketed over the past few years. Although there’s great gains to be made with the right value add improvements to a property, the most expedient value add is buying the property for significantly less than it’s worth. Ben Kogut, partner at HJH Investments, has been having great success buying office buildings, shopping centers, and single tenant retail properties from motivated sellers at prices below considerable below market. These properties do not have big improvement needs to achieve stabilization and therefore are generating impressive cash flow at the onset of the investments so investors start getting their distributions right away.

With loan terms maturating and escalating borrowing costs, many Real Estate properties are going to be in trouble. With these escalating costs combined with higher operating expenses and contracting rents, many properties will be sold at deep discounts in the next 6-12 months. This will present great buying opportunities for acquirers. Cameron Pimm, Co-Founder & Principal of Urban Landings, has been investing in multifamily properties in Atlanta, Charleston and Las. Vegas and generating internal rates of return of 23% and equity multiples of 1.9 times for investors in just under three years. Cameron looks forward to the upcoming buying opportunities to enhance his already stellar record of performance. 

This country is facing a housing affordability crisis with few foreseeable solutions. Shortage of supply, increased construction costs, and the costs to operate have escalated. If the cost of construction could be reduced, however, it would be the first step to solving the affordable housing conundrum. Mike Kaeding. CEO of Norhart, is innovating the way apartment buildings are being built with more cost efficiency and is incorporating advanced technologies into the day-to-day operations. This innovation is resulting in best-of-class experience for residents and creating a new status quo in the apartment industry that will ultimately result in cost savings for renters.

1.5 trillion dollars in Real Estate debt is coming due by 2025. This Is starting to cause major distress across asset classes, markets, and sponsors. On top of increased borrowing costs, expenses such as insurance, taxes, and labor have increased faster than rents and delinquencies are becoming more common. On the other side of the equation, great deals for investors are on the horizon to acquire distressed assets. Patrick Grimes, Founder of Invest on Main Street.com, is taking advantage of this great situation and is offering attractive opportunities for investors to participate in this opportunistic marketplace. Patrick has a recession-resistant Real Estate fund plus funds in other lucrative asset classes that are uncorrelated to the broader market. 

Single family homes are the most conservative asset class to both operate and lend against. Right now, inventory levels are the lowest they’ve ever been, so prices have maintained despite dramatic interest rate increases. Matt Owens, CEO and Owner of OCG properties, has bought, renovated, sold or held over 1000 single family properties in the last 15+ years. Matt currently has a debt fund where he lends against single family homes in the Midwest that generates a consistent above market return for his investors. Matt is also starting a fund that provides fractional ownership of a portfolio of 25 homes he has acquired for himself over the past few years.

Although there are multifamily properties of all sizes that are not managed well, smaller buildings without on-site staff and ma and pa owners tend to be more likely to be run unprofessionally. These properties pose opportunity for new buyers with more professional management infrastructure and processes. Will Matheson, Co-founder with his twin brother of Matheson Capital, has had incredible success adding value to smaller properties and generating consistently large returns. In one Class A property in Boone, North Carolina, they’ve increased rents 60% in the last year.

One asset class for passive investors that often gets overlooked is Short-Term Rentals. Like in other asset classes, there are companies that will manage the whole process starting with identifying the properties and managing them from start to scratch. You can get monthly cash flow with properties in great vacation destination markets with a lot of appreciation.  Leslie Anne Morris, The Cabin Lady, is the owner of Josh’s Cabins, a company that finds properties for out-of-state investors, and handles all the accommodations so all you have to do is enjoy the passive income. 

By controlling all the construction and property management processes, you can successfully operate Multifamily properties, as long as you don’t overpay for the properties and you know how to manage expenses. Matthew Shields, Founder and CEO of Significan, has been buying and operating Multifamily properties mostly in Northeast Ohio and Atlanta since 2017, and generating excellent returns. Matt is a serial entrepreneur who also owns other companies including Virtus Ventures, a software company that creates software solutions for companies with $50-$150 million in revenue.

Passive investing can generate cash flow, appreciation, and tax benefits through depreciation. By investing with others, you don’t have to spend time managing properties which may not even cash flow. They key is finding operators with the right experience and skills to make sure your investment is secure. Whitney Elkins Huttten, Director of Investor Education at Passiveinvesting.com, is a partner in $700M+ of real estate including over 5000+ residential units (Multifamily, Mobile Home Parks, Single Families, and Assisted Living) and more than 1400+ self-storage units.