Street Smart Success

In this environment, certain multifamily housing markets are seeing an 80% decrease in transaction volume vs. a year ago. Even though interest rates have increased way more than anyone predicted as recent as 6 months ago and operating expenses are increasing, sellers are still holding out for what they could have gotten in previous months. Eventually, some sellers will have a more pressing need to sell and pricing expectations will become more realistic. At this point, more sensible deals will materialize that experienced operators with the right lender relationships and track records will be able to capitalize on. Patience will pay off handsomely for seasoned operators and investors who are sitting on cash.

Although interest rates are on the rise at a faster clip than at any other time in recent history, the fed has historically lowered rates within two years following the past ten rate hike peaks. This is one of the reasons that over a long period of time, multifamily apartments are a resilient and safe asset class to invest in, especially in growing markets. J Scott, a multifamily investor, owns six apartment buildings across 800 units in Houston with fixed, long-term debt. J loves Houston for its immense population expansion (the second fastest in the country), job growth and diversity of industry and jobs.

Sometimes adding value to properties has more to do with intangibles such as improving resident culture and building a sense of community than merely improving the physical assets of a property. When residents derive quality of life benefits from residing at a community and take pride in where they live, they’ll see more value in the experience and be willing to pay more to live there and take better care of their property. Demetre Booker, Managing Director at Elevate Commercial, is investing in Manufactured Housing communities in different parts of the country. Demetre’s changing his resident’s lives by helping improve their financial literacy and overall quality of life, and in so doing, he's increasing the profit of the properties and doing very well by his investors.

In this investing environment, it’s difficult to get an 8% to 10% yield on your cash and still achieve appreciation, without taking a lot of risk. With stabilized neighborhood retail, however, and office buildings in certain markets, this is still possible with the right deal, and especially the right operator. Nate Melchior, Principal at Dunton Commercial, manages a portfolio of 70 mid-size retail and office properties throughout the state of Colorado where they’re based. Nate and his partner also own and syndicate properties which generate high, risk-adjusted returns. Since their primary business is property management in these asset classes, the vertical integration enables them to maximize the returns on these properties and gain efficiencies that translate into great profits for their investors.

There’s great money to be made in government subsidized, affordable housing. Occupancy is generally high and tenancies can last for years. It’s a recipe for steady, predictable income and high margins. On the management side, however, there can be challenges figuring out how to manage lower income, working class tenants and do it at a profit. Mike Bonadies, Co-Owner and Managing Partner at TerraVestra properties in Southern New Jersey, owns his own rental portfolio and also manages 500 units for other landlords. The properties are in rural South Jersey and are typically older, so in-house maintenance and construction are keys to Mike’s success.

The world of alternative investments holds the promise of outsized gains and returns that exceed the public stock and bond markets. They also entail great risks. When investing in alternative investment funds, you need to make sure the management team has a great reputation, a great track record, and a fee structure that’s aligned with their investors. Kelly Ann Winget, Founder of Alternative Wealth Partners, has raised $1B in private capital in her career from individual investors looking for investments outside of the stock market. Prior to founding Alternative Wealth Partners, Kelly Ann worked at another firm and became disgruntled at how investors were being treated and the poor communications. That’s why she founded Alternative Wealth Partners. Kelly has started her first fund and is already generating significant dividends for her investors with some potential lucrative exits. Kelly Ann is focused on smaller, entrepreneurial companies to help them grow their companies through debt or equity.

Most people aren’t even familiar with the term “Alternative Investments.” That’s because until a decade ago, operators of apartment buildings and other Real Estate assets, Private Equity funds, or private companies couldn’t legally market these assets to the public to raise money. Ever since the creation of the 506c code a decade ago, however, these operators can now legally market to retail investors so the general public can more easily access and invest in them. Alternative Investments provide investors opportunities to invest outside of publicly traded stocks and bonds and often times with better yields and returns. Dana Cornell, Chief Executive Officer at Cornell Holdings, was a top-producing Wealth Advisor at Morgan Stanley before founding Cornell Capital Holdings. At Cornell Capital Holdings, Dana helps place clients in great cash-flowing, appreciating, tax efficient Alternative Investments vehicles.

In multifamily properties, it can be a challenge to manage buildings with fewer than 50-100 units. Third party property management companies cost a lot of money and having an in-house employee live on-site can be too expensive without enough units to amortize their cost. Additionally, it’s difficult to manage these smaller apartment buildings from afar, especially if you’re adding value to them with rehabs. Samuel Sells, CEO of Wild Mountain Capital, has acquired over 20 buildings over the past few years. Now he’s selling them and redeploying the capital into bigger buildings. He’s also shrinking his geographic footprint down from six to two states because he’s vertically integrated and it’s become to difficult to efficiently manage these properties from too far away.

There’s nothing passive about investing in older apartment buildings. Appliances, roofs, HVAC systems, plumbing etc. have limited lifespans so there’s perpetual upkeep and surprising expenses are far from uncommon. In new construction, by comparison, you can control all the variables and therefore the costs can be more predictable and therefore the profits. Roger Luri, CEO and President of LD2 Development in Chicago, and author of the new book “Don’t Buy Multifamily! BUILD IT,” has been in construction since the late 80’s and has seen several huge challenges in older multifamily buildings and has experience several market cycles. Roger is an expert and understands the risks of both older multifamily projects and new construction.

If you pay close attention and evaluate what’s going around you, you can see opportunities and markets to be served that others don’t. It just requires continual awareness and objectivity and an honest appraisal of what you’re good at and want to spend time doing. After being in Investor Relations and a co-GP on a number of apartment deals. Matthew Baltzell founded Elite Podcast Bookings to connect sponsors and capital raisers with great Real Estate podcasts. There are literally thousands of commercial Real Estate operators looking to build exposure and raise money but don’t have the time nor the expertise to get on podcasts to build their brand and raise capital. This is where Matthew and Elite Podcast Bookings come in. They are the only podcast booking company for Real Estate professionals that’s run by a Real Estate professional himself.