Boots-on-the-Ground Market Insights: Apartments

Boots-on-the-Ground Market Insights: Apartments

May 2020

The Coronavirus health crisis is now an economic crisis.  Find out how apartments are faring!

Russell Gray, Co-Host of The Real Estate Guys™ Radio Show, interviews Brad Sumrok about what Brad and his thousands of students are experiencing right now.

The bottom line is that no matter what happens …

People still need housing.  But the question on every apartment owner’s mind is …

Will tenants be able to pay their rent?

Will they?

Russ & Brad discuss the current state of apartment …

• Occupancy
• Rent Collections
• Tenant Applications
• Tenant Screening Criteria
• Rent Concessions
• Tenant Retention Strategies
• Variances by Real Estate Markets
• Emerging Opportunities

Plus, Brad shares his proven recipe for finding the best apartment markets to invest in.

For immediate access, simply complete the form below …

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COVID-19 Crisis – Tips for Property and Portfolio Management

Managing multi-family properties has always had its own challenges and considerations … but the COVID-19 crisis makes it considerably more complicated. 

How are landlords managing the risks and the responsibilities during these difficult times?

We’re checking in with The Apartment King, Brad Sumrok, to get his practical tips for property and portfolio management in the COVID-19 world. 

In this episode of The Real Estate Guys™ show, hear from:

• Your managerial host, Robert Helms
• His unmanageable co-host, Russell Gray
• The Apartment King, Brad Sumrok

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Management in a COVID-19 world 

COVID-19 has affected all kinds of industries … and real estate has certainly felt the blows. 

Everybody is figuring out how to reinvent themselves and reinvent their businesses. 

Real estate is at its base a brick and mortar business. You don’t have virtual real estate. People go in and they live somewhere. 

For the last few weeks, we have been talking about the various ripple effects of what has happened. When your tenant is suddenly unemployed and can’t pay rent, you can’t pay your mortgage servicer … and they can’t pay the underlying investor. 

So, today we’re talking about how investors like YOU can manage your properties and portfolios in a COVID-19 world. 

We’re talking with someone who has got a big, big portfolio and lots of people he works with … but he also knows how to be proactive in a crisis. 

What apartment investors need to know

We call Brad Sumrok “The Apartment King.” He is a gentleman and no stranger to the ups and downs of real estate.

“Obviously, none of us have been through a crisis like this before, but as an apartment investor since 2002, I not only survived the 2008 depression, but I thrived during that time,” Brad says.

Brad says he implements a strategy of “winterizing” his portfolio … and he teaches his students to do the same.

“This is what we call an economic winter, so it’s important to winterize your portfolio,” Brad says.

There are specific actions that apartment investors need to be taking in the midst of the coronavirus storm. Ideally you do these things while the sun is still shining … but if you didn’t, it’s not too late.

The vast majority of Brad and his students’ deals have these Fannie Mae and Freddie Mac loans. As it stands, those people have 120 days during which they cannot provide notice to vacate for nonpayment of rent.

The good news is that these moratoriums don’t allow a resident to break the lease. They don’t allow the resident to never pay the rent. They simply have to pay later if they can’t pay now.

The reality is that most tenants in B and C class properties don’t have several months’ worth of savings set aside.

So, owners need to be in contact with their managers, and managers need to be in contact with the tenants.

“I’m having biweekly calls with my management companies and frequent emails just checking in on collections. We’ve been talking about strategies to preserve capital,” Brad says.

Those strategies include suspending investor distributions, capital improvements, and value added upgrades.

Leasing has also gone from physical tours to virtual tours … which Brad says may have its advantages.

“I think as we come out of this and move forward, we are all going to be looking at how to do online business even better,” Brad says.

Brad and his team have also been proactive in providing notice to their tenants on what to do if their income has been impacted.

This includes informing them of the resources they can get under the Cares Act, how to get government assistance, and when they should be expecting stimulus checks.

“We want to position ourselves as a resource for our residents during this time,” Brad says.

Residents are home more than they ever were before … so it is even more critical that they have a safe, clean place to live.

Managers should also be thinking about how to help residents maintain social distancing in the complex and in common areas like the laundry room.

Navigating mortgages

Agency lenders, primarily Fannie and Freddie, came out with guidance on what is being known as forbearance.

Forbearance is a process where the property owner can delay paying the principal and interest. Brad recommends these things be considered as a last resort … but it depends on your situation.

Entering into one of these programs gives you the ability to delay payments. You can get up to 90 days or three months of your payments delayed.

Remember … these payments are not forgiven. You have up to 12 months to pay back the amount you delayed.

And, investors have to apply for these programs. It isn’t guaranteed that you will be accepted to delay your payments.

You’ll have to show a decline in collections. For example, you would need to show your collections for January, February, and March … and then show a substantial drop off in April.

You’ll also need to be in a position where you have no positive cashflow. And, you’ll have to agree not to evict residents until you pay all of the money back.

Communicating with investors

Brad suggests sending out weekly updates to your investors. Be open and transparent.

“I will say that there is always going to be that one out of a hundred investor that is going to be really upset that they aren’t getting distributions right now,” Brad says. “There isn’t a lot you can do about that.”

But outside of those few individuals, Brad says everybody really understands that this is temporary to keep things running until we start to come out of this crisis.

For more on how to manage properties and portfolios during the COVID-19 crisis … listen in to the full episode!

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More From The Real Estate Guys™…

• Sign up for The Real Estate Guys™ Free Newsletter
• Check out all the great free info in our Special Reports library.
• Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
• Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

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Podcast: COVID-19 Crisis – Tips for Property and Portfolio Management

WEEKEND 2 WEALTH – EXCLUSIVE ONLINE EVENT

Weekend 2 Wealth

 

Upcoming Dates To Be Announced!

 

To be sure YOU get Priority Access registration >>

 

 

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✓ How to get your deals easily financed by utilizing Brad’s extensive network of skilled investors

✓ How to avoid common rookie investor mistakes & invest like a seasoned pro

✓ How to use your self directed IRA to invest & make double-digit returns

✓ Exactly what to do to get started right NOW & so much more!

 

To be sure YOU get Priority Access registration >>

 

Three Ways to Get Started in Apartment Investing

Apartments. They’re everywhere … and in the world of real estate they are hot, hot, hot!

This niche provides economies of scale, lots of cash flow, great tax breaks, and many different options for financing. 

But if you’re coming from single family homes, making the leap into a bigger building can be intimidating at first … but it’s not as scary as you may think. 

Our special guest Brad Sumrok explains three ways investors like YOU can get started in apartment investing … and where he sees the best opportunities in 2020. 

In this episode of The Real Estate Guys™ show, hear from:

• Your informative host, Robert Helms
• His inquisitive co-host, Russell Gray
• Apartment expert and educator, Brad Sumrok

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The bread and butter of real estate

One of the most popular ways to invest is … apartments!

We have a special place in our hearts for apartments. For many years, we’ve been multifamily guys. 

We love this space because of the recession resistant nature of apartments. You have everything from beautiful A class to rougher C class … all serving a basic human need. 

Apartments are bread and butter real estate. There’s always demand and tons of support at every level. 

And don’t forget that the powers that be have a vested interest in making sure there is affordable housing … and typically that means apartments. 

Most real estate investors probably would love to do apartments, but they just feel like it’s out there somewhere beyond them. 

Apartments are not as elusive as you think. And, some of the best mortgage financing available is for apartments. 

At the beginning of each year, our friend Brad Sumrok creates a market forecast for apartments. He’s sharing his ideas and three ways you can invest in apartment buildings … TODAY. 

That’s why we call him “The Apartment King.”

Your own deal, your own money

The first way to invest in apartments is to buy your own deal with your own money. 

That’s what Brad did back in 2002. 

“I bought a 32-unit building, put $200K down, got an $800K loan. I worked for 17 years in corporate America and saved up my money,” Brad says. 

Brad still buys all his own deals with his own money. Going that route you get great cash flow, great upside, and amazing tax advantages. 

Generally, we don’t let the tax tail wag the investment dog … but especially in apartments there are so many great tax benefits. 

If you invest in your own account, save your money, and live below your means, you’ll have a down payment, and your lender will work with you to make sure that the property is going to work out. 

That’s one way to own apartments, and a lot of people do that. The challenge, of course, is that not everyone has $200K to invest … nor can they qualify for the loan. 

But there are other ways to get into apartment investing. 

Syndication

The second way to enter this lucrative niche is syndication. It’s a great way to be a more active investor. 

Being a syndicator is not a passive role. It’s an active role. 

When you are syndicating a deal, there is a managing member or general partner … also called a lead investor or a deal sponsor. 

That person is the one going out there, finding deals, analyzing them, raising money, making operating decisions, managing the property or management company, securing the financing and implementing the business plan. 

Syndicating is a great way to get into multifamily investing. 

Let’s say you want to buy a $10 million building. For that deal, you’ll need $3 million down and a $7 million loan. 

If you’re syndicating, you may have $500K to put into that deal. So, you go out and raise $2.95 million from investors in their database. 

The great thing about syndication is that you’re not limited to your own resources. You have some skin in the game … but you are dividing the risk and dividing the returns. 

Together, all the people in a syndication deal are able to get the benefits of owning the apartment complex … the income, tax deductions, and depreciation … but they don’t have to do all the work. 

Passive investing 

The third way to get involved in apartments is passive investing. 

In the syndication deal, if you’re not the sponsor, you can be a passive investor. These people are commonly referred to as limited partners. 

Before you throw your money into a deal … get educated and do your research. 

Once you get educated, find a sponsor that you know, like, and trust. Then, put your money into their deal. From that point … it’s passive. 

It’s a great way to get a great return, You get your share, and you don’t have to do a lot of work. 

Passive investing is also a great way to diversify your portfolio and get into other markets. And it’s a great way to learn for future deals you may want to lead yourself. 

“The truth is, I do all three types of investing,” Brad says. 

The 2020 forecast

Brad says 2020 looks like it’s going to be another really good year for apartments. 

Rents are going to go up. Employment is growing, which means that people will need places to live as they start new jobs. 

There’s currently a shortage of workforce housing … also known as B and C class. 

All of that spells out opportunity. 

For your very own complimentary copy of the apartment investing forecast mentioned in the show, send your email request to [email protected].  

And for more on apartment investing … listen in to the full episode!

More From The Real Estate Guys™…

• Sign up for The Real Estate Guys™ Free Newsletter
• Check out all the great free info in our Special Reports library.
• Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
• Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

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Podcast: Three Ways to Get Started in Apartment Investing

Getting to the Next Level with Your Real Estate Investing

The real estate game is all about the long game. It’s a process of learning … and often a rollercoaster of rapid growth, steady plateaus, dips, and rising back. 

The key for investors is to always be pushing to the next level. 

So … we’re talking about how to do just that. 

We’re ready to talk getting started, getting out of ruts, and getting yourself to the next level of the real estate game. 

 In this episode of The Real Estate Guys™ show, hear from:

• Your level-headed host, Robert Helms
• His on-the-level co-host, Russell Gray 

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A natural evolution in real estate

Where are you as a real estate investor?

Whether you’re just starting to think about it, getting started, or a seasoned professional ready to make a jump into a new niche … we’re here to help you get to your next level. 

Not all investors are created equal. Not all investors start in the same place or end up in the same place … but there IS a natural progression and evolution as a real estate investor. 

Part of that transformation is about knowledge and information. The other part is about actually changing. 

If you remain who you’ve always been, you’re going to do things the way you’ve always done them, and you’ll get the same results. 

What we’ve learned through observing many people at various stages of their development is that everything starts with your personal transformation … what you THINK and what you BELIEVE. 

Pretty soon, that starts to manifest in the decision you make and the results you produce. 

No matter where you’re at in your own evolution, there are several standard stages … and several standard ways to move to the next level. 

Is real estate for you?

The first stage is when you’re not sure you want to be a real estate investor … but you think you might. 

You’re exploring whether real estate is a possibility for you. 

Most people do it part-time and are looking to get cash flow. But there’s a lot you have to learn. 

The good news is that real estate is really relatively easy if you keep it simple. You accumulate properties over time and pay attention to details like cash flow. 

You can compress time frames to accelerate the process. Part of that is developing a vision. 

If you put strategy and effort into your real estate dealings, you can create more wealth faster. 

Start by getting around people who are already doing what you would like to be doing and learning from them. 

This principle applies to everyone. Find someone who is playing the game at a higher level than you and learn from them. 

There are also lots of great books out there about getting started that can teach you the minute details of real estate deals. 

All of this knowledge contributes to establishing what we call your personal investment philosophy. 

Just like every investor is different, you want to set up your real estate investing process as something that supports who you are and your skill sets … not the other way around. 

Buying your first property 

After you’ve decided to take the leap into real estate, it’s time to buy a property. 

Buying your first property is awesome and exciting … even when the property itself might not be that fabulous. 

For you to qualify for loans on property, it really helps to have a dependable income … aka a  good job. 

That’s why so many beginners in real estate do it part-time. You might be ready financially to go and quit your job, but having an income and a credit score can help you. 

A few years after buying your first property, you may be ready to buy a second … and a few years later you buy a third. Hopefully over time they produce income and go up in value. 

Direction is more important than speed. Set your course and then get moving. 

Remember … you’re working on your reputation as an investor, which is more than just your credit score. 

Most people start off in single family homes … but you don’t have to. 

Our good friend Brad Sumrok bought a 32 unit apartment building as his first investment. We know folks whose first investment was an agricultural property. 

But still, most people invest in a townhouse or a condo or a single family home. It’s small, reasonable, and easy to understand.

Then the next part of the natural evolution happens … you look for a second or a different asset class within real estate.  

Moving into different niches

So many people start investing in single family and then start to look at a multi-unit property like an apartment building and think … maybe I want to go into multifamily next. 

Or maybe you want to focus in on another marketplace like retail or industrial. 

Real estate is made up of so many different niches that behave differently depending on what is going on in the economy. 

As you observe what is happening in the world around you, you can be strategic in catching where you think the wave of real estate demand is flowing. 

As you move into a new niche, there is a little window of opportunity where a bunch of buyers run in and buy. They bid things up, and things slow down a bit. 

You can learn to spot this window over time as you start paying attention. 

Expanding into different niches lets you diversify and helps you build your experience resume. 

And to get really juicy returns, most investors need to make the shift into these types of bigger markets. 

Going full-time in real estate

When you reach the point that your passive portfolio can provide the income you need without working … it’s time to ask yourself if you want to go full-time into real estate. 

When people see that their passive income from their real estate portfolio exceeds their full-time income, they usually want to retire. 

But so many people find that they actually want to stay busy. 

So, you use your real estate portfolio as a base … and you start reinvesting your own money. 

You can also start sharing your expertise with other people and partnering with them. Or, you may take on private investors. 

You may decide to invest your time and money into learning a whole new asset niche and developing your expertise there. 

Something many people forget is that there is a particular tax benefit that comes along with being a full-time real estate professional. 

You’ll want to talk to your tax professional about that, but it’s definitely a benefit of being full-time alongside setting your own schedule and being your own boss. 

The point is that there is no one way to take your real estate experience to the next level … there are MANY ways!

And that’s what makes it exciting. 

Learn more about getting to the next level with your real estate investments by listening in to the full episode. 

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More From The Real Estate Guys™…

• Sign up for The Real Estate Guys™ Free Newsletter
• Check out all the great free info in our Special Reports library.
• Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
• Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

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Live from the 17th Annual Summit at Sea

Ten amazing days … over 200 people … studying, sharing, learning, growing, and partying … that’s the Investor Summit at Sea!

For 17 years, the Summit at Sea has been the highlight of our year … and we’re excited to share a piece of it with YOU.

We’ve gathered some of real estate’s most successful investors, entrepreneurs, niche experts, and thought leaders to share their insights and key takeaways from the 2019 Summit.

Listen in and learn what these pros discovered … and how it could help you make smarter investment decisions.

In this episode of The Real Estate Guys™ show, hear from:

• Your sailing host, Robert Helms
• His flailing co-host, Russell Gray
• Author and seasteading expert, Joe Quirk
• Rich Dad, Poor Dad best-selling author, Robert Kiyosaki
• The Apartment King, Brad Sumrok
• Marketing mastermind, Kyle Wilson
• The Godfather of Real Estate, Bob Helms
• And SO MANY MORE!

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This is the Investor Summit at Sea

The annual Investor Summit at Sea is always a highlight of our year.

It’s a concentrated amount of time with some of real estate’s smartest people … all from different walks of life, different perspectives, and even different countries.

Every year, we learn to ask better questions … clarify our thinking … and do things differently.

Opportunities like the Summit at Sea are rare. In a short time frame, investors become friends, work out problems, and do some business.

We’d love EVERY one of our listeners to join us on the high seas … but we’d need a bigger boat!

So, we’ve brought together some of our fabulous faculty members to share their insights and key takeaways from the 2019 Summit at Sea.

A first glimpse at seasteading

Joe Quirk was a last minute addition to our faculty this year … and we’re so glad he came.

Joe’s real estate niche is seasteading … that’s right … homesteading the high seas.

It’s a novel idea. Joe says that … considering nearly half the world’s surface is unclaimed by any existing nation state … the technology is at hand to create startup countries on the ocean.

“It’s sort of a Silicon Valley sensibility brought to the problem of governance,” Joe says.

Instead of trying to change things from the inside, you create startups and do things better.

The first seastead has been floating off the coast of Thailand since early 2019 … and living there costs less than the average American home.

Joe and his team are ready to scale up … and scale up quickly. But he needs partners with real estate smarts to make it happen.

“We have marine engineers, economists, scientists, and medical experts. We have almost everyone we need, but we don’t have people that know how to structure and sell these things,” Joe says.

We view seasteading as a fascinating new frontier in real estate … and we’ll have more with Joe in the coming weeks.

Look at deals through a new lens

It’s Robert Kiyosaki’s sixth Summit at Sea … and we couldn’t be happier to welcome him back.

“I come to learn as well as to teach,” Robert says. “The Summit at Sea is basically immersion learning for real estate.”

Our port excursion this year was Grand Cayman. This area has undergone an interesting transition over the last few years.

Typically, people think of Grand Cayman as the place where rich people want to hide their money … but it is so much more!

Robert says he learned that how you look at a deal can really change the opportunities you see.

In the case of Grand Cayman, Robert had always looked at the market from the point of view of an investor … but he learned that sometimes it pays to try looking at a market from a developer’s point of view instead.

Through this lens, he could see that Grand Cayman is becoming a target for families. As the economic gap between rich and poor widens on other islands … crime rates are rising.

But Grand Cayman has the lowest crime rate in the Caribbean.

That fact coupled with high standards of living make it attractive to a new housing demographic … not just people looking for a tax shelter.

“There’s a deal of a lifetime every minute if you can see it,” Robert says.

Expand your team, increase your success

The Apartment King, Brad Sumrok, joins us for his third Summit at Sea.

Brad has made apartments his bread and butter … but that doesn’t mean he is done learning and growing.

“I keep expanding my team every time I’m here,” Brad says.

There’s no better way to grow your team than by spending a week and a half on a ship with 200 other people who specialize in a variety of asset classes.

So much of investment success is leveraging other people’s experience.

Last year, Brad says he connected with our good friend CPA Tom Wheelwright … and this year Tom saved Brad seven figures in taxes!

That’s a take away Brad took directly to the bank … and by surrounding yourself with smart people, you can do the same.

Master your marketing one step at a time

We’ve known Kyle Wilson for many years. He is a familiar face on the Summit at Sea … and always has great ideas for how to better market your real estate business.

“So many people are in the real estate business. They’re good at real estate. They’re good at finding markets and putting together teams, but not always solid in their marketing position,” Kyle says.

It’s easy to overcomplicate marketing. At the end of the day, marketing is simply connecting the dots for your customers.

Kyle says the key for real estate investors is to act in a strategic way. Don’t just throw a bunch of stuff at the wall and hope it sticks.

And remember that so much of real estate investing is built on relationships. Never let what seems like a good tactic get in the way of a good relationship.

Kyle is leaving the Summit with a list of ideas and action items … but cautions investors to take things one step at a time.

“You can’t do it all. Pick the one thing that’s screaming at you that will make the biggest difference and start there,” Kyle says.

A wealth of amazing opportunities

If anyone understands the benefits of an opportunity like the Investor Summit at Sea, it’s the Godfather of Real Estate himself … Bob Helms!

We’ve been hosting these cruise ship conferences for 17 years … and Bob has been with us every time.

With 40 years of real estate experience, Bob has seen amazing changes in the way investors make money and grow their opportunities.

“As I look at the group that is here with us today and the diversity of things they are involved in, I can’t help but have a big grin on my face,” Bob says. “The opportunities out there are amazing.”

Bob says his advice to investors is to educate themselves on different locations and asset classes. Find the niche that is right for you … and start building a winning team!

Get on the advance notice list for next year’s Summit at Sea by visiting our website … and listen in to the full episode to hear from even more experts and ideas from our week on the waves.

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More From The Real Estate Guys™…

• Sign up for The Real Estate Guys™ Free Newsletter
• Check out all the great free info in our Special Reports library.
• Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
• Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

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Forecasting the Future of Real Estate in 2019

Are you prepared for the future?

In our annual yearly forecast episode, we explore the future of real estate in 2019. We don’t have a crystal ball … but we do have great resources and smart friends.

Hear from three real estate experts on the state of the housing market, the effect of changing interest rates, the outlook for commercial real estate, and MORE.

In this episode of The Real Estate Guys™ show you’ll hear from:

• Your forward-thinking host, Robert Helms
• His fraidy-cat co-host, Russell Gray
• Consultant and new home expert John Burns
• Podcaster and real-estate expert Kathy Fettke
• The Apartment King, Brad Sumrok

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In the news …

We’ve scoured the news sources and industry journals to see what might be coming in 2019.

The National Association of Realtors predicts in their 2019 Forecast that home sales will flatten and home prices will continue to increase.

The report also says not to expect a buyers’ market within the next five years except in the case of a significant economic shift.

On the other hand, the forecast cautions sellers to be mindful of increasing competition. It notes inventory growth, particularly in high-end housing, but reminds readers of the current housing shortage.

We’ve looked at predictions from various experts. Several of those experts predicted home prices will stabilize or rise at a much slower rate than in previous years.

One expert predicted listings in entry-level markets will remain tight. Yet another predicted industrial markets will continue to sizzle, interest rates will keep rising, and apartment rents will steadily moderate.

We’ve also read an article covering the State of the Market Panel hosted by Real Estate Journals.

The panelists agreed 2019 will be a big year for commercial real estate, including some new industrial and distribution/warehousing opportunities. They noted commercial rates will keep inching up.

Investors should consider opportunity zones and changes in the tax code in 2019. There are far different incentives for investors than for homeowners, and expensive housing means even more people will be pushed from buying to renting.

Predictions for the new home industry from John Burns

John Burns runs John Burns Real Estate Consulting, and he aims to help people in the new home industry understand trends.

In 2019, John says he is, “confident we won’t see construction grow that much.” He notes sales slowed dramatically in 2018, and he believes people will continue to be cautious.

What are builders paying attention to? They’re trying to build smarter with strategies like offsite construction and materials efficiency. They’re also building better by integrating smart-home technology and pivoting toward lower price points.

What about trends in home ownership? John says he thinks ownership is ticking back up. He says the millennial generation has some unique considerations … most want homes, but compared to previous generations, it may take them a bit longer to commit, especially because of increasing student loan debt.

And how do interest rates affect home builders? “It takes a big bite out the market,” John says. If people can’t get mortgages or can’t afford a new mortgage, they’re less likely to invest in a new home.

Take advantage of opportunity zones in 2019, says Kathy Fettke

Investors should look for jobs and opportunities in 2019. There will always be certain companies and cities that will thrive through a recession, says podcaster and Real Wealth Network founder Kathy Fettke.

These areas can provide investors with both equity and cashflow … and with new opportunity zones, there’s also the potential for tax breaks.

Neighborhoods that are flooded with investors because they’re opportunity zones WILL see equity growth, Kathy notes.

But just because an area is an opportunity zone doesn’t mean it’s a guaranteed good deal, and Kathy cautions investors to make sure deals make sense by investigating if they’ll hold out in the long run. That means job sources, stable and growing infrastructure, and good prospects for revitalization.

“You need the city on your side,” she says.

In 2019, Kathy is looking for stable employers that can thrive through a recession … she mentions Netflix. She warns investors not to get ahead of themselves by investing in areas that aren’t likely to improve within 10 years.

Employment is low, and interest rates are rising. We asked Kathy what she thinks will happen in that arena.

She says that while it’s hard to predict what will happen with the Trump administration, investors should keep their eye on corporate debt.

The ’08 recession happened because of a big consumer debt problem … corporate debt might cause trouble in the future. So, take a close look at the businesses that employ renters when investigating a market.

“Our world is changing so quickly,” Kathy notes. “Today is no longer a world where you can invest and forget about it for 30 years.” So in the housing realm, make sure you’re looking beyond the current tenant to say, who’s next? And will they have a job? Look for stability.

Demand and supply in multi-family, with Brad Sumrok

Last, we talked to the Apartment King, Brad Sumrok, educator and investor in the multi-family housing realm.

“I’m still proceeding with caution,” Brad says. But he notes there are many indicators that multi-family will continue to be a good asset.

We asked him whether some of the signs of doom from ’07 and ’08 are happening again in the multi-family space. The short answer? No.

Back then, there was a huge oversupply of housing. Now, there’s a 2-million-unit shortage. Most building now is happening in the A-class luxury space … but that’s not where the demand is. That means there’s an oversupply of luxury housing … but still some great opportunities to provide housing for working-class tenants.

Most people in the B and C class aren’t renters by choice … it costs, on average, $339 more per month to own a home than to rent. For blue-collar tenants, that’s a huge difference. And strict financing is further reducing the number of buyers.

That means more renters, and more demand for housing.

An increasing number of investors are looking at multi-family, which does inevitably mean cap-rate compression. But tax laws are on the side of investors.

“As the market changes, you have to temper your expectations,” Brad notes. Investors can’t expect to triple their equity in three years, and returns are likely to align with historical models.

That means there’s less of a cushion for making mistakes. It’s a strong case for investors to educate themselves before getting into an asset class.

To get educated on the multi-family market, check out Brad Sumrok’s 2019 Apartment Forecast! We wish you lots of equity in the new year.

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Why Apartments Now

Why Apartments Now

 

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