The Truth about Real Estate’s Latest Dirt Word: “Syndication”
In real estate, when the market is hot and values/cash flows are increasing, every mistake gets overlooked. When the market turns (and it always does), investors scrutinize everything. However, in today’s world where anyone can produce media, it’s not just investors who scrutinize, it’s anon Twitter accounts, newsletters, niche media sites etc. In real estate today, there’s no bigger public punching bag than multifamily syndicators. I’m not going to say it’s undeserved. There are several high-profile examples of multifamily syndicators who got over their skis, charge exorbitant...
The Evolution of a Multifamily Syndicator
Every so often, I go back and read old blog posts to get a sense of my thinking at the time. It can be embarrassing (like the bearish case for multifamily in 2019), but others (such as why we prefer value-add deals and long-term holds and our 4 forms of sustainable competitive advantage) serve as incredible resource for me to understand my views at specific times and as a result, reflect on my decision-making. One thing I’ve consistently said over the years is that by establishing trust with our investors, we can scale our high-net-worth capital base. With the use of technology and...
The Institutionalization of Vacation Rentals
Some of the most interesting real estate deals today are vacation rentals, which is a subset of the more broadly known STR (short-term rental) space. These investments offer the potential for outsized returns and combine my passions for branding/marketing, creating unique experiences, and generating outsized passive cash flow. This post isn’t about the Sonders/Mint Houses of the world and the emergence of semi-professional STR operators who take units within traditional apartment communities (I’ve written about them before). The STR space I’m excited about today are vacation rentals....
The Evolution and Future of Apartment Community Short-Term Rentals
The lines between hospitality and traditional apartment communities continue to blur, with the modern renter expecting flexibility. The way we work has forever changed and we will not go back to our pre-COVID lives once we reach herd immunity. As an apartment operator, we’re responding to demand shifts by offering residents the optionality to lease units on a short-term basis and move out with limited notice. Today, this optionality is provided by 3rd party short-term rental operators who partner with landlords and handle all the logistics of sourcing and managing residents who plan to...
‘Co-Living meets #vanlife’
In my previous post, I discussed the concept of living-as-a-service, flexible housing models driven by technology which cater to young professionals who can work and live anywhere. The accelerated trend of remote work along with the growing passion economy is fueling these new housing models. While we’re seeing innovation within traditional housing models, we’re also seeing non-traditional housing models emerge such as Kibbo. Kibbo is a network of high-end RV parks which cater specifically to ‘remote-working, previously urban professionals (PUPs)’. For $1,000/mo. members get access to...
Why Syndicators Should Always Over Raise Equity
Moses Kagan is the founder of Adaptive Realty which focuses on heavy value-add multifamily projects throughout the LA area. I really enjoy his views on the real estate business which he shares often over on his blog. In his most recent post, he discusses a concerning trend he’s seeing utilized by syndicators who raise capital via crowdfunding sites. In order to attract investors to their deal, syndicators must market deals with both current cash flow and high IRR’s. However, in today’s market, it’s nearly impossible to have both, so syndicators are over-raising capital to be used to make...
When Knowing Too Much Makes you a Bad Investor
Over the past 10 years, we’ve executed nearly $75M worth of renovation work across 20+ value-add multifamily projects. Over that period, we’ve experienced many of the unexpected things that can go wrong when executing these deals; hidden physical issues, larger than expected tax reassessments, tenant lawsuits, crime, resident delinquency issues, and submarket challenges like unanticipated new supply or poor policy decisions, to name a few. It’s like Farmers Insurance, “we know a thing or two because we’ve seen a thing or two”. While being educated on all the potential risks of a deal...
The Key to Multifamily Asset Management: Controlling Costs and Creatively Adding Value
Every so often I scan through the real estate forum on Wall Street Oasis and I recently came across an interesting thread titled ‘Contrarian Thesis: Acquisitions is the Least Interesting Job in Real Estate’. The post argued that acquisitions is a repetitive job wrought with frustration and best-suited for young analysts who are hungry and proficient with the latest technology. Asset and portfolio management, on the other hand, tend to be the most valuable and interesting roles. The asset managers recognize the value-add upside, know what it cost to renovate, have intimate knowledge of...
The Bearish Case for Multifamily
Multifamily has been the darling of the recovery and remains one of the most sought-after asset classes. And why wouldn’t it be? We’re constantly bombarded with the case for multifamily; there’s a secular shift toward renting, millennials are getting married and having kids later, baby boomers are downsizing and seeking an urban lifestyle, multifamily construction was well below historic norms coming out of the recession, many 18-34-year-old’s live at home and will eventually enter the renter pool etc. etc. It’s a compelling case. Some of these are real, while others are overblown. In...
The Multifamily ‘Amenities Arms Race’ Shows no Signs of Slowing
Multifamily development has picked up considerably over the past few years, as the demand for high-quality apartment communities near major employment centers and entertainment has increased. Driven by demographics, couples getting married and having kids later, lifestyle choices, and pent-up demand, millennials, Gen Z, and some Baby Boomers are flocking to newly-developed class A communities. These individuals seek a lifestyle and expect way more than a nice place to live; they desire conveniences, technology, a robust resident event program and sense of community, and amenities. Lots of...
The Key to an Effective Value-Add Strategy: Hands-On Oversight
In my role at Atlas, I oversee our value-add multifamily strategy. We buy 1970’s – 1990’s class B value-add properties and seek assets that are priced below replacement cost and comparable sales, where we can add value at then property level, and that are in markets we like long-term. Adding value is hard. It requires a hands-on approach, local market knowledge, creative-thinking, and great management skills. At Atlas, we’re a lean team and hire 3rd parties to assist with property management, construction management, design and architecture, and marketing. As such, my role is largely...
The Only Information Needed to Make Multifamily Investment Decisions
The real estate community has become obsessed with data. In the multifamily space alone, there are countless sources for all sorts of ‘relevant’ data; Costar, Axiometrics, REIS, Reonomy, RCA, MPF Research, Yardi Matrix, etc. The access to data has brought transparency to the space, but has led to better decision-making or just more noise? There’s been several studies which have concluded that more information doesn’t necessarily lead to better investment decisions and oftentimes, having more information can be harmful because it leads to over-confidence and fuels confirmation bias....
5 Things I learned in 2018 and 5 Goals for 2019
Happy New Year, everyone! I hope you're able to unplug and enjoy quality time with family and friends. I find that time off, completely disconnected from the day-to-day grind of daily work is key to regaining focus and igniting the spark of creativity. 2018 was another productive year on ASotREG. I rolled out a site redesign (ASotREG 3.0), launched a new eBook on passive real estate investing, and published 14 new posts. I’m incredibly humbled and appreciative of everyone who has given me their attention. Your time is the most valuable asset you have, so it inspires me to do everything I...
I Write to Discover What I Think: The Power of the Quarterly Investor Letter
“I write to discover what I think. After all, the bars aren't open that early.” This is a well-known quote from American historian Daniel Boorstin and it’s exactly why I write this blog. I write about topics I find interesting, and the writing process enables me to tighten up my thinking. Some of my favorite posts such as the future of urban living, the impact autonomous cars will have on the built environment, and how to be an entreployee within your firm were ideas that I was interested in and wanted to vet further. I have a deep passion for unique housing models, I’m fascinated by the...
What Happens to Class B/C Apartment Investments During a Downturn?
I'm a firm believer that real estate is best held long-term with great local teams on the ground. At Atlas, our model (deal-by-deal syndication) enables us to acquire assets that we can hold for 20+ years and control the repositioning with great local teams. From an asset class perspective, we focus primarily on acquiring value-add class B/C garden-style apartments. Although valuations may swing wildly across cycles, cash-flow remains relatively stable. By having full controls, we can exit/refi at optimal times, while maintaining conservative leverage and cash reserves to weather any...
The One Book Every Student of the Real Estate Game Must Own
A key tenet of ‘A Student of the Real Estate Game’ is to never stop learning. In my day-to-day as a real estate professional, I spend a majority of my time in the weeds, acquiring and asset managing value-add multifamily real estate in a few specific markets. One day may be spent negotiating a Purchase and Sale Agreement for a new acquisition, the next may be spent working with our onsite GC to trouble-shoot renovation issues, and others may be spent on calls and meetings with brokers and property management staff. While I enjoy every aspect of the job, this leaves little time for...
Integrating Data Across the Real Estate Life-Cycle
As the real estate industry becomes more institutionalized, there is greater demand for quality data. Data is the key to making informed decisions. Having a solid grasp of the current cap rates, financing markets, vacancy rates, rent growth projections, construction costs, population, employment, and income growth, are all critical to accurate deal underwriting and execution. However, most real estate professionals (myself included) only have access to select data-sources, providing limited data which may or may not be out-of-date. The data we maintain internally is unstructured and...
New ASotREG eBook – 19 Real Estate Investors Share their Top Passive Real Estate Investing Tips
Cash-flowing private real estate deals can make great investments. However, with the space being highly unregulated and access to deals/sponsors fragmented, there’s a belief that investors must be real estate experts to make educated investment decisions. I think those expectations are crazy and the narrative prevents many individuals from investing in private real estate deals. Instead of expecting investors to be real estate experts, I believe investors should know just enough about real estate to ask the right questions, assess a Sponsor, and make informed investment decisions. Of...
Aspects of the Real Estate Acquisition Process I find Frustrating
Over the past several weeks, I’ve been deep in a new value-add multifamily transaction. Acquiring real estate is cumbersome, complex, and opaque, yet we continue to complacently accept this reality. Part of the issue is that acquiring real estate is very fragmented, with different players collecting disparate data, requiring 3rd parties, and all profiting from different elements of the process. This complexity is exactly where opportunity lies. Based on my recent experience, here are a few of the aspects of the acquisition process I find most frustrating. Deal Sourcing The deal sourcing...
How to Win Marketed Multifamily Real Estate Deals
In real estate acquisitions, you seek the coveted off-market deals. These deals are more likely to be mis-priced, creating an attractive risk-return structure for operators with a track record for executing a specific investment strategy. However, fully-marketed deals can also be attractive opportunities. The challenge with marketed deals, however, is that you can spend a lot of time and money underwriting a deal, with no guarantee of being selected as the buyer. Contrary to common belief, the group that bids the most is not the group that necessarily wins fully marketed multifamily real...