Street Smart Success

Buying at a discount is the most dependable way to make money. Suburban office is one of the few examples left where you can still find considerable value. In some markets, you can buy these properties for as little as $10/ft where it costs $200/ft to build. What’s more, you don’t have to find off-market deals, they’re listed publicly on LoopNet, Crexi, and other listing sites. As workers have moved to the suburbs and left downtown districts, they’ve chosen to work closer to home. As a result, many suburban office buildings are at 90% occupancy.  Ken Naim, founder of Beacon One Capital, has acquired cash-flowing suburban office properties and also buys industrial buildings in smaller markets.

Investing in NNN fast food franchises and limited-service hotel Real Estate is a great way to profit from steady operating businesses. Joe Tagliente is Managing Partner of Tage Capital Partners, a firm founded in 1970 with a single restaurant by family patriarch, Joseph P. Tagliente.  Tage Capital has grown to become a leading hospitality company in New England. Today, Tage Capital is one of the largest privately held, hospitality real estate investment groups in the United States with net-leased investments in quick service restaurants, casual dining restaurants, and hotels.

Despite ample sentiment to the contrary, we may not be headed into a recession any time soon according to at least one well known, respected economist. In fact, we’re just four years past the pandemic, and we’re seeing steady, conservative growth. As far as AI disruption, and potential unemployment that may result, this may occur slower than many people think.  Peter Linneman, Principal of Linneman Associates, is a prolific multi-decade investor and founder of Wharton's Real Estate Department and the Zell-Lurie Real Estate Center. Peter Is bullish on the U.S. economy and it’s growth prospects for near future.

One way to generate large, short-term profits in Real Estate is flipping houses. There are many methods to finding great deals, and the money to acquire these properties is readily available when the deals make sense. You can find houses via auctions, wholesalers, or tried and true direct marketing efforts like flyers, Direct Mail, driving neighborhoods, even knocking on doors. Dan Cantillana, or Dan Can, is a successful insurance broker in Spokane, Washington who has expanded into flipping 30-40 houses per year over the past several years.  

Nothing has caused more loss of principal in Real Estate than too much debt. Leverage works great in an upward trending market, but it cuts the other way in a downturn.  Joel Friedland, Principal of BRIT properties, has been buying infill industrial properties with all cash since learning the hard way during the 2008-09 financial crises. Joel and his investors are seeking conservative investments with the primary goal of capital preservation. He buys highly sought-after properties that appeal to both owner-users and tenants. Joel specializes in industrial properties in Chicago that deliver 7% unleveraged returns.

AI will change the world even more than the internet, with profound implications for most aspects of society, including massive wealth creation. It will impact many sectors of commerce, including Real Estate. Amongst other implications, AI is creating an insatiable demand for Data Centers and a scramble for computing power. Peter Lewis, Chairman and Founder of Wharton Equity Partners, has over 35 years of experience as a real estate owner, developer, and operator, and is now merging with Lighthouse, a turnkey developer of Data Centers. The founders of Lighthouse formerly led Midwest and Western data center development for Amazon Web Services.

For fix and flip entrepreneurs of single-family homes, it’s hard to get financing from traditional lenders. This lack of access to capital creates a market for private lenders who have the flexibility and access to capital. It’s a win-win for borrowers and lenders. Borrowers get capital to fund their businesses; lenders make a healthy return for making these kinds of loans. Investors who invest in hard money funds also do well, earning sometimes as high as high teen returns. Matt Medrano, Co-founder and CRO of Dynamo Capital, has a growing fund of hard money loans, mostly in Wichita, and is expanding to other Midwest cities.

Although cracks are starting to appear in various commercial real estate asset classes, prices have still not come down enough to be investible. Prices have come down, but they’ve come down off record highs and lenders are still conducting workouts with sponsors. If we continue to see significant job losses, and recession ensues, prices may eventually come down enough to make sense for cash-flow investors. Jeremy Roll, a full-time passive investor, left his steady corporate job in 2007 and has lived 100% off the cash flow ever since. Jeremy has been in over 250 passive investments.

Despite its initial trajectory, ecommerce has plateaued at 16% of total retail sales. Concurrently, the cost of land, borrowing, and construction has made it prohibitive to build new retail centers. As a result, occupancy levels at existing properties are in the mid-high 90’s, and sometimes even 100%. There’s a huge demand for space from restaurants, beauty salons, yoga and pilates studios, gyms, massage clinics, plus other medical providers like dentists and chiropractors.  Cyndi Peach, Managing Partner of Nexphase Venture Partners, has had successful exits of strip centers over the past decade and continues to build her portfolio.

When it comes to stable tenants and predictable cash flow, it’s hard to find a better asset class then Medical Office. As the population ages and people live longer, the demand for medical care will continue to flourish. Plus, technology will never replace the human body. Another commercial real estate class with predictable cash flow is Multifamily. Multifamily is attractive because of looming loan maturities and resulting distress.  Ben Reinberg, CEO of Alliance Consolidated Group of Companies, has specialized in Medical Office for the last twenty years and is now capitalizing on Multifamily to leverage current buying opportunities to acquire great properties for less than replacement costs.