Street Smart Success

When looking for yield, money from the coasts often winds up in other parts of the country. Great markets like Chicago offer better yields, and still offer very strong fundamentals for investors that provide cash flow and appreciation. Danny Spitz, CEO and Managing Partner at Greenstone Partners, helps serve the needs of private and institutional investors with a focus on $2,000,000 to $40,000,000 deals in retail, apartments, office and industrial properties. Danny has focused mostly on Chicago, where he lives and works. He is also expanding into downtown Milwaukee, which is an hour and a half north of Chicago on Lake Michigan and shares many of the same characteristics of Chicago.

A 3 or a 4 cap in one market is not always equal to a 3 or 4 cap in another market. The risk profile is greater in markets where there’s fewer regulatory challenges and lower barriers to entry in developing new projects. In California, and other West Coast markets, on the other hand, regulations and restrictions are far more onerous, so these markets are perpetually supply challenged, and therefore higher and more consistent rental demand. Eddie Ring, Founder and CEO of New Standard Equities, specializes in value-add multifamily on the West Coast and has generated 29% IRR’s and equity multiples of 2.6 over three to five years hold periods for his investors. Eddie sticks with what he knows, as opposed to exploring other markets, and has generated incredible returns for his investors.

If you know how to manage lower income tenants and how to optimize the management of older properties, you can do extremely well. Many of these properties have ma and pa owners with under market rents and bloated expenses. On the supply side, there just aren’t enough of these properties for tenants to live in and there’s been very little new construction in many markets. As a result, occupancy levels can be well over 90%. Richard Simtob, Partner at Simtob Management and Investments, has acquired over 700 Class C apartment units in Lansing and Kalamazoo, Michigan with his son, and they’re doubling down on acquiring more as other buyers are moving to the sidelines.

In the last five years, value add multifamily deals have abounded where you can buy a building at under significantly market rent, put $5,000- $10,000/unit into rehab, and sell within 12-24 months at a huge profit. As more and newer competition has entered the market, and as prices dramatically increased, these opportunities have become much harder to find. In addition, renters in these properties are particularly burdened by inflation and other economic factors. Will Matheson, Co-founder with his twin brother of Matheson Capital, had incredible success repositioning class C and B properties over the last four years and is now transitioning into Class A buildings in the Southeast where the tenant base is far less rent burdened so the overall rent upside and ultimate investor returns has the potential to be considerable higher over time.

When things go wrong in a smaller apartment deal, it can wipe out all the Net Operating Income and profit in the deal. On bigger deals over 100 units, the property can absorb a lot more unexpected costs or mistakes before it erodes all the profit. Augostino Pintus, founder of Realty Dynamics Equity Partners in Cleveland, realized early on that it was much easier for him to operate bigger buildings. He also chose the Cleveland market because it didn’t have the crazy competition of many markets in the South and Southwest and he could get better returns. Now that even Cleveland has gotten more expensive, Agostino is doing ground up multifamily development in urban infill areas where young professionals are moving into. He’s also started a fund of NNN lease properties where he’s generating monthly checks for his investors.

After owning three Assisted Living homes in Phoenix, entrepreneur Gene Guarino created the Residential Assisted Living Academy in 2013 to train others to prosper like he had from the mega-trend of senior Assisted Living. The Residential Assisted Living Academy has since trained thousands of individuals to either start their own facility or acquire existing facilities in towns across the U.S. Last year, Gene unfortunately passed away, and his daughter Isabelle, who started The Residential Assisted Living Academy with him, officially took over the business. Isabelle Guarino Smith is now leading the company and further building upon Genes’ legacy by helping small entrepreneurs get into this growing business. The training from The Residential Assisted Living Academy prepares students to run higher-end facilities that cost an average of $6,000/month per resident and ultimately run as many as three or more facilities.

With all asset classes priced at historically high levels, you may need to be open to different opportunities to find the right deal. When you expand your criteria, you’ll have more deals presented to you. The more deals that come across your desk, the more good deals you’ll find. Keith Nelson, Managing partner of Dual City investments Greenville, SC, started in multifamily back in 2014, but has pivoted to other asset classes across several markets in order to find great deals. In Keith’s latest fund, he has a profitable boutique hotel, an A Class Office Building, multifamily, and single family assets. The fund is also an evergreen fund, which means there’s no set close date that can force him to sell at an inopportune time in the market.

According to The Family Office Real Estate Institute, a Family Office is a family with $250 Million to deploy in investable assets. There are 7500 in the U.S. and 16,000 in the world. 70% of families lose their money by the second generation and 90% lose it by the third. This is why family offices need expert advice on how to preserve and grow their capital. DJ Van Keuren created the The Family Office Real Estate Institute in order to provide Family Offices with Best in Class education and resources to help them preserve wealth and achieve their goals. He’s also Co-managing member of Evergreen Property Managers where he helps Family Offices get strong risk adjusted returns in various Real Estate Asset classes with some of the country’s best operators.

It’s hard to achieve economies of scale operating multifamily apartments with fewer than 100 units, but if you buy smaller buildings close to each other, you can gain operational efficiencies that translates into more profit. There’s also far less competition when buying these properties that bigger properties so you can often get better deals. Mark Weinstein, President of MJW investments, has acquired many smaller properties in close proximity and amortized management functions and operating expenses to make these buildings very profitable. Over the course if his career, Mark has acquired over $1,500,000,000 of apartments, student housing, commercial buildings, industrial, and self-storage facilities.

What is a Family Office? The term “Family Office” has become more common over the past decade and the number of Family Offices is growing at a fast clip. A Family Office is a private wealth management advisory firm founded by an ultra-high-net-worth individual or family to manage their assets. Ultra-high-net-worth families or individuals (UHNWIs) are people with at least $30 million in investable assets. Richard Wilson, CEO of the Family Office Club, has helped 200 families create their own Family Offices in addition to creating 20 “live” events that Family Offices can attend where they learn Best Practices of investing and structuring portfolios plus learn about different investment opportunities and strategies.