Routine Replacement Expenses: “Multifamily’ s Dirty Little Secret”

I was talking with a multifamily fund operator who’s been in the business for 30+ years. His firm started out buying class C multi deals and scaled up over time to raise a fund with institutional capital to acquire higher-quality, light value-add multifamily assets. The primary driver of the movement upstream was the capital-intensive nature of older vintage apartment properties. The ongoing capital needs make it difficult to hold these assets long-term and require holding significant reserves. In real estate, ‘cap rate’ is used as a crude metric for valuation and is simply a measure of...

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The Challenge of Holding Multifamily Assets Long-Term

In my previous post, I talked about the value of compounding which results over holding multifamily real estate assets long-term. While that’s great in theory, it’s difficult to hold older vintage multifamily assets long-term (longer than 10 years). At Atlas, our business plan typically entails renovating and repositioning assets to bring them in line with other recently upgraded communities in the area. We rebrand the property, correct operational deficiencies, clean up deferred maintenance, improve curb appeal, and upgrade amenities and unit interiors; all of which typically result in...

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Hold Real Estate Forever, Reinvest, Compound, Don’t Pay Taxes, And Get Rich Slow

Real estate is a long-term, get rich slow business. That’s something you hear a lot, but the math and reasoning behind it is rarely illustrated. At Atlas REP, our investment strategy centers around buying cash-flowing value-added multifamily properties and holding long-term (10+ years). I believe multifamily real estate investing is most attractive over a long time horizon given the strong and consistent cash flow combined with significant tax benefits. To illustrate these benefits, I wanted to show the equity growth and cash flow of a $100k real estate investment over 30 years. This was...

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Apartments, Hotels, What’s the Difference!?

The way people are living, and traveling has fundamentally changed and the lines between apartments and hotels have blurred. Guests and renters are no longer constrained by a market flooded with watered-down options and brands dictating the experience.  Today, renters and travelers have nearly endless options, catering to any experience they seek.    I recently traveled to Nashville and I decided to test out Niido, an apartment community ‘powered by Airbnb’. It’s a traditional midrise apartment community that allows (encourages, actually) its residents to rent out their apartments...

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Bringing a Hospitality Mindset to Multifamily Development

We’re in the midst of a multifamily development boom. If you’ve been to any major city over the past few years, you see ‘stumpy’ midrise developments everywhere. The forgettable stick-frame buildings all look similar. They are relatively cheap to construct, go up quickly, and cater to a wave of demand from Millennials and Gen Z’ers delaying marriage, having kids, and buying or renting a home in the suburb. With the cost of construction and land at elevated levels, development yields are compressed, developers have little flexibility to physically differentiate their property from the...

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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...

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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...

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Do We Need to Change the Way we Think About Homeownership?

My answer to the question posed in the title is ‘I have no idea’. However, I’m a firm believer that homeownership is not the best path for everyone and that the role of homeownership in the U.S. has been skewed in a way that is dangerous. The term ‘American Dream’ comes from James Truslow Adams ‘Epic of America’ who wrote in 1931, “life should be better and richer and fuller for everyone, with the opportunity for each according to ability or achievement regardless of social class or circumstances of birth.” The original term didn’t have anything to do with real estate but has evolved over...

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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...

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What’s Driving the Demand for Apartments and why I’m Bullish Class B Multi

Multifamily, class B in particular, has been one of the best performing asset classes over the past decade. Demand has outpaced supply, leading to sustained rent growth and significant investor interest. As of March 2019, the average apartment vacancy rate was near all-time lows at roughly 6.5%. While the demand drivers for apartments is somewhat obvious, I want to dig into the statistics/fundamentals in more depth. It’s important to first understand the size of the market. There are 120M households in the U.S. totaling 317M total people. Of the total households, roughly 43M are...

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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...

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Who Says Workforce Housing Can’t be Sexy

Historically, class B/C garden-style apartment communities have been typified by dated 70’s/80’s architecture, uninspiring interior design, lackluster landscaping, and boring commodity amenities. Recently, the divide between class A and class B/C apartment communities has been exacerbated by the amenity arms race, with each new development looking to outdo its competitors. It’s common for new communities to include golf simulators, meditation rooms, indoor self-cleaning dog parks, rooftop pool/lounges, and generally over-the-top design and features, while class B communities still have...

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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...

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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...

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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...

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The Many Futures of Urban Living

It’s no secret that most young professionals today prefer a 24/7 live/work/play environment. More than ever, talent is clustering in dense, urban areas. However, as jobs and people have moved back into cities in droves, urban housing has become too expensive for the average worker. As rental rates and housing prices in urban areas has skyrocketed, innovative real estate developers have stepped in to create more affordable living environments. We have micro-units, co-living, macro-living, temp living, and several technology platforms that support the new urban lifestyle. Let's dig in to...

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Reflections from Japan

As I write this, I’m on my flight back from an incredible two-week trip around Japan. We spent our first day in Osaka before embarking on a three-day hike of the Kumano Kodo trail. From there, we spent a few nights exploring Kyoto and Hiroshima with day-trips to Wiyajima, Naoshima, and Takamatsu. We wrapped it up with three nights in Tokyo before flying back to NYC. It was a trip of a lifetime, filled with many eye-opening cultural experiences. Here are just a few of my many reflections from the visit.  ‘Omotenashi’ Omotenashi is the spirt of Japanese...

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How to Source Off-Market Real Estate Deals

Real estate is both a local and relationship-driven business. When looking for operating partners, Atlas seeks teams who exhibit niche business strategies in well-defined geographies, local connectivity, micro-market knowledge, and a proven track record of successful execution. The local focus and niche strategy enable operators to source coveted ‘off-market deals’. In this post, I want to explore some of the strategies around off-market deal sourcing. Before I get into the actual techniques, let me reiterate that these are only effective if you have a niche...

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Where do Great Real Estate Deals Come From? 3 Real World Examples

The most challenging aspect of doing your own real estate deals, especially early on, is sourcing great opportunities. It’s finding that first deal that you’re willing to stake your entire reputation on and go all-in. While I’ve shared the secret to deal sourcing and how entrepreneurial real estate operators efficiently source deals, the truth is that great deals don’t come from any one source. Rather, great deals are sourced by great operators. Great operators who’ve established a great reputation and network. Great operators who know their asset class and market inside and out. Great...

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BLDG’ing a Real Estate Firm is Harder than you can Imagine (but worth it!)

“Real estate professionals get into the business to be entrepreneurs.” That’s a phrase I use a lot on the blog. I’ve written posts about the entrepreneurial nature of the business, the challenges of starting a real estate investment firm, and how hard it is to start your own firm during a hot market.  I want to add a caveat to the phrase; “real estate professionals get into the business to be entrepreneurs, but real estate entrepreneurship is littered with failure.” This interview is a post-mortem on a venture that did not succeed, whose founders are willing to...

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Alturas Capital: Born to be a Real Estate Entrepreneur

‘Real estate is an entrepreneurial business’ is a phrase I throw around a lot on this site. It’s true, but what does it even mean? It’s a combination of two things; first, many real estate professionals get into the business to ultimately become entrepreneurs. Secondly, success in real estate, whether on your own or within a larger organization, requires entrepreneurial thinking. Blake Hansen, Managing Partner at Alturas Capital, is the quintessential ‘entrepreneur’ who stumbled upon investing at a young age. He started out at age 11 investing in stocks, growing...

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Trion Properties: How an ex-Investment Sales Broker Built a $100M Portfolio

I recently published an eBook detailing what 20 real estate operators wish they knew when starting their firms, which is chalk-full of great tips for aspiring real estate entrepreneurs. One of the contributors was Max Sharkansky of Trion Properties, an owner/operator based out of LA. I met up with Max a few weeks back in NYC and was incredibly impressed with his approach to investing, the company culture he's created at Trion, and the portfolio he's built since starting the firm in 2005. I was inspired by Max and wanted to share the Trion story, some of the...

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Stage 3 Properties – Redefining Cosmopolitan Living for Urban Renters

I spend a lot of time showcasing real estate investment firms who have found success investing across the major food groups; multifamily, office, retail, and industrial.  The entrepreneur’s career paths are in no way linear, but they often work with a best-in-class institutional real estate firm prior to venturing off on their own. Their investment strategy and execution is sound, but often not innovative. However, that’s not the only path to entrepreneurial success. Real estate is a business that rewards creativity, and professionals who come from more...

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Wall Street Lawyer Turned Real Estate Investor Finds Success in Multifamily Investing

I first met Jonathan Twombly at the Harvard Club in Midtown NYC.  Over lunch Jonathan shared his career story, describing how he transitioned from Wall Street attorney to real estate entrepreneur. With no traditional real estate training, Jonathan has been able to acquire his first few deals and build a nice platform in just a few years. As a full-time real estate professional, I have an appreciation for how complex real estate can be and how challenging it is to do your first deal. I was inspired by his story and invited Jonathan to share it with you first-hand....

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NeWell: Rethinking Apartment Design

I always tell people that one of the great aspects of the real estate business is that people who can think creatively, do things a bit differently, and have the talent to execute, can be very successful. Over the past 5 years I've been following the work of Alex Hodara, Vin Vomero, and Jeffrey Zucker, a couple of young guys in Boston making moves. From their reality TV show and brokerage business to their fledgling development company, these guys epitomize what's great about the real estate business. Every time I catch up with these guys they seem to be working on something new and...

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My Thoughts on the Single-Family Rental (SFR)

A few weeks ago I published a one-line post: What did you do back when interest rates were the lowest of your lifetime? For an investor and entrepreneur, these are truly unprecedented times, yet few are actually taking advantage of this economic landscape. I hope to look back in 20 years and have a good answer. The greatest opportunity in real estate these days is the emerging real estate segment - the single-family rental. Heck, there was even a story on Planet Money of a 14 year-old Florida girl who purchased her own rental home! From 5 years ago, roughly speaking, housing prices are...

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Interview – The Urban Village Concept Redefines the Apartment Community

It only takes two things to turn a group of people into a strong community; a shared interested and a way to communicate. Peter Slaugh, the founder of of Su Casa Properties, harnesses this through his Urban Village concept which rethinks how tenants interact within an apartment community. Peter was nice enough to tell me a bit more about the Urban Village concept. Enter Peter: How would you describe Su Casa Properties in one sentence? Su Casa Properties is a multifamily investment platform for High Networth Individuals who look to maximize investment returns with an eye towards social...

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Views expressed in “content” (including posts, podcasts, videos) linked on this website or posted in social media and other platforms (collectively, “content distribution outlets”) are my own and are not the views of Atlas Real Estate Partners, L.L.C. (“AREP”) or its respective affiliates. The content should not be construed as or relied upon in any manner as investment, legal, tax, or other advice. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.