A great sector of Real Estate investing with a low barrier to entry is land flipping. Land flipping requires little start-up money, and the profits can be incredibly lucrative, with very little downside. There are millions of vacant land parcels in the United States. Mike Deaton, a successful land investor, generates as much income from land investing as he and his wife made combined in high-paying corporate salaries. Buying and selling land is easier than investing in houses, apartments, or other commercial buildings because it’s just land with no physical structure. After becoming very successful flipping land, Mike is now coaching others on how to replicate his success.

A new apartment building is at its highest value upon completion of construction. Like a new car, it’s a depreciating asset. That’s why you need to invest with operators who have a lot of experience with all aspects of the business to make money.  Most syndicators are finance professionals, not operators.  Most of the appreciation of multifamily over the past couple decades has been the result of declining interest rates, which will most likely not be repeated in the near future. Isaac Bennett, Founder of You Are, has invested in multifamily both as a Limited Partner and Principal, and has learned the hard way the critical importance of working with top-notch operators. Isaac is a multifamily investor and also develops land and invests in other alternative investments. 

Aside from the merits of the real estate itself, financing is the other critical component that makes or breaks deals. Securing capital, and how it’s structured, is the underpinning of the deal, and can determine whether the property will be able to withstand fluctuations in the operations, market, and unforeseen economic occurrences. Eric Brody, Founder & Principal at ANAX Realty Partners, utilizes data analytics to guide clients through the intricate process of debt and equity, asset revitalization, restructuring and recapitalization. Eric works with owners, investors, and developers to navigate the financing of deals.

Although there are challenges in the multifamily space in certain markets, some markets are still flourishing, and the longer-term fundamentals are strong. Demand is still growing, and supply Is not keeping up with demand. Currently, there are great deals being sold by developers on newly constructed properties at below construction cost. This is a once in a decade to fifteen-year opportunity. Michael Zaransky, Founding and Managing Principal of MZ Capital Partners, has been acquiring newer properties in Texas, Tennessee, and his home city of Chicago, and capitalizing on this rare opportunity.

Although the stock market is trading at all-time highs, it can go higher as investors reallocate money from underperforming bonds and Commercial Real Estate in particular. Many investors specifically prefer allocating much of their portfolio to the S & P 500. Warren Buffett, one of the greatest investors of all time, instructed a trustee to invest 90% of his cash in an S&P 500 index fund and 10% in short-term government bonds. According to Buffett, the market has gotten too efficient and claimed, “there are no bargains out there.” The S & P has shown remarkable predictability, resilience and appreciation. Bob Wiedemer is a Senior Investment Advisor at Bull Bear Investment Management, who helps his clients invest in S & P 500 index funds. Bob is also the Author of New York Times and Wall Street Journal Bestseller Aftershock and Fake Money, Real Danger.

With new multifamily supply coming to a standstill, occupancy rates will rise over the next few years and assets will appreciate. In the meantime, multifamily is rife with challenges in most markets. Interest rates have risen dramatically, expenses have skyrocketed, and occupancy has fallen. Despite this downward pressure, prices have still not contracted enough for experienced operators to want to acquire. Cameron Pimm, Co-founder of Stonemark Landings, is a multifamily operator who is looking to expand his current workforce portfolio into more holdings in South Carolina, Nevada and Salt Lake City. With a dearth of good deals in the 100+ unit market, Cameron is starting to look at sub-100-unit deals where there’s less competition and more inefficiency in the pricing. 

Compared to most other asset classes, Self-Storage has more resilience across different economic cycles. Self-Storage has a steadier revenue stream and low operating expense ratios that produce 70% margins. Additionally, over the last two years, very few people have moved, thereby suppressing the demand for self-storage. As a result, 12 month trailing Net Operating Incomes have suffered, and prices have come down accordingly. There’s also a shortage of self-storage facilities in many secondary and tertiary markets. Joe Downs, Co-founder of Belrose Storage, has acquired 18 Self-Storage facilities directly from sellers in the mid-Atlantic region and the Southeast, with big value-add components. Joe has consistently increased income and lowered expenses to achieve great returns for his investors. 

What happens onsite on a daily basis at apartment complexes is what makes or breaks the deal. The relationship with management personnel largely determines whether or not a tenants renew. That’s why every interaction matters. The other aspect that impacts success in running apartments is the speed and effectiveness of unit turns. Nothing bleeds a property more than delayed unit turns. These are just two reasons to bring property management in-house. Daniel Twito, Owner/Operator of InvetnJoy multifamily, owns eight properties in Dallas-Ft Worth, and has created a fully-integrated in-house management company to maximize the performance of his portfolio. 

Despite the negative media coverage, both outdoor and enclosed shopping centers in vibrant markets are viable assets to invest in and are being offered at highly discounted prices. Although the proliferation of discount stores like TJ Max, Ross, and Nordstrom Rack, combined with the Amazon effect and Covid, have put a lot of retailers out of business, there are several retail survivors who are thriving. Some of these stores are expanding rapidly and have limited options of where to open because there’s been almost new construction of malls since 2008. This is creating high demand for space and benefitting neighborhood retail centers. Andy Weiner, President of Rockstep Capital, is investing in shopping centers in solid secondary and tertiary markets that are generating great returns for his investors. 

Short term loan maturities are a death sentence in a down market, which is causing major pain for sponsors and Limited Partners. Since mid-2022, multifamily prices have plummeted as high as 40%, and transaction volume is down 80%. Class C, in particular, has taken the largest beating. Currently, lenders are giving loan extensions to sponsors who can raise more money, thereby reducing their exposure. In turn, the lenders are hoping they’ll be able to foreclose at the end of the extension, and sell the properties in a better market. Brian Burke, President and CEO of Praxis Capital, has been through several cycles, and believes that 2025 will be a transition year for multifamily.