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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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 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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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....

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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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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...

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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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How to Make Apartment Features and Amenities Sounds Sexy

We recently embarked on a project aimed at improving the online marketing process for all our multifamily properties. The intent was to greatly improve our web presence, access deeper analytics, build a multifamily brand, and control the process from the ownership-level. Since we utilize 3rd party property management, each asset utilized a different website template, property management software, paid search marketing strategy, lead tracking process etc. From the ownership side, we had little transparency into the effectiveness of each marketing channel and were unable to make data-driven...

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Why we Prefer Value-Add Deals and Long-Term Holds

Real estate firms and investors each form their own investment strategy based on their risk-tolerance, desired hold period, expertise, and target returns. Some prefer core or core-plus investments which are typically high-quality assets in primary markets with little unrealized upside, while others prefer opportunistic investments such as ground-up development. Here at Atlas, we target primarily value-add transactions where we can execute a specific strategy with the aim of refinancing upon stabilization and holding long-term.  Value-add transactions possess upside...

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What’s Your Moat? 4 Forms of Sustainable Competitive Advantages at Atlas

The key to success in real estate investing (and business) isn’t simply finding a competitive advantage, it’s having a sustainable advantage that others are unable to replicate. Warren Buffet popularized the term economic moat, which refers to a “business’s ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.” As real estate becomes more institutionalized, the typical competitive advantages are arbitraged away; Informational advantages, even in secondary and tertiary markets, are not sustainable....

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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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When Investing in Real Estate Invest with the Best Sponsor and Ignore Everything Else

I spend a lot of time on this blog analyzing deal structures, return metrics, risk-adjusted returns, and the impact of fees. While all that stuff is meaningful, it shouldn’t be the main driver of your investment decisions. Instead, focus your efforts first on finding a top quality sponsor. If there’s anything I learned about value-add real estate investing over the past 6 years, it’s that the success or failure of a deal is driven almost entirely by the quality of the sponsor. Here are 20 reasons to ignore all the noise and invest with a great sponsor. Great...

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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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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.