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[Video] Investor Decks And Underwriting Assumptions

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In this webinar we discuss what you should do before investing in your first passive real estate deal. We also dive into which assumptions to pull from investor decks and explain how those assumptions affect investor returns. Lastly, we list the top questions we ask sponsors before investing in deals.    

[Video] Fire to 259% Return – The Story

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Here is the recording of our recent webinar were we take a deep dive into our recent full-cycle multifamily deal where we provided a 259% return in 3 years. See the detailed business plan, challenges and results as we took this deal from start to finish.  

Why Full-Cycle Deals Matter

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Going full-cycle on a real estate deal is an important milestone. It shows that team members have taken a property to the finish line from purchase to sale, implementing a business plan, and overcoming challenges along the way.  There is nothing passive about operating large assets. During a multi-year hold period, a team will encounter … Read more

Multifamily Real Estate In Recessions

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Is it finally official? With the latest economic data showing a 0.6% contraction in GDP, let’s call a duck a duck. We are in a recession. Multifamily real estate can be a more reliable and recession-resistant asset during a downturn. It tends to outperform other types of commercial real estate simply because it serves a … Read more

What Does It Mean To Be An Accredited Investor?

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Once you dive into the real estate investing world, it won’t be long before you hear the term “Accredited Investor.” Once you notice how many passive commercial real estate or crowdfunded investment opportunities are publicly advertised and therefore limited to accredited investors, you may get curious.  Even if you’re a total newbie, it’s essential to know the … Read more

8 Differences Between REITs And Real Estate Syndications

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If real estate investing seems interesting to you, but you’d rather avoid becoming a landlord, you’re not alone. Fixing toilet emergencies at 3 am isn’t appealing to most people. It’s one of the primary reasons we are selling some of our personally owned smaller assets.  The next logical step that many investors take is toward … Read more

5 Strategies To Diversify Your Real Estate Portfolio

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Diversification is a risk management strategy that mixes various investments within a single portfolio. The purpose of diversification is to not get caught with all of your eggs in one basket during a significant downturn, thereby preserving capital for the long haul.  How many of you reading this have a financial advisor that has claimed … Read more

Stocks Versus Real Estate: The 4 Risks You Need to Know Before Investing

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Anytime investing is brought up, people’s minds flash between images of Warren Buffet, memories of the Great Recession, and those goals filed in their “someday” folder.

Unfortunately, 60% of Americans find investing to be scary. Being afraid leads individuals to put off what they could be doing today to tomorrow. Sixty percent also realize that someday they will need greater financial security than they currently have.

This blog will discuss the four primary risks of investing, how commercial multifamily real estate investments mitigate risk, and why the stock market can be riskier than real estate.

A Primer on Risk

Investment risk is defined as the chance that an outcome or investment’s gains will differ from the expected outcome or return. Risks measure the uncertainty in achieving the returns an investor expects.

An element of risk exists in anything you do in life. There is a risk of getting in the car to drive to work in the morning. Unexpected things happen in life, the stock market, and real estate.

The key is not to look for risk-free investments but to understand the risks thoroughly, determine your threshold for risk, and ensure that you’re doing everything you can to mitigate risk. This blog discusses four risks associated with the stock market and compares them to multifamily investing.

Risk #1 – Market Correction

Stock Market

Raise your hand if your 401k got obliterated during the initial COVID-19 panic. I’m raising two hands!! Thank goodness I did not move to the sidelines during that stressful time.

Fear of a downturn causes investors to remain or move to the sidelines. Investors may exit quickly, which solidifies their losses. Others aim to accept short-term losses in exchange for long-term gains. Historically, the market bounces back, but clinging to that trust during a downward trend is challenging.

Multifamily Real Estate Investments

Recessions are sometimes good for commercial multifamily real estate investments, especially workforce housing (C-Class assets).

In good times, incomes and savings rates are higher, which means more people tend to move up to class A (luxury) apartments.

When faced with layoffs or pay cuts, homeowners may sell, and renters of class A apartments may downgrade to more affordable apartments (class B or C).

Hence, during a recession, demand for apartments and occupancy tends to increase, decreasing the risk. Higher occupancy can help balance the potential lower rent growth seen during recessions.

Risk #2 – Competition

Stock Market

When Netflix stormed the scene, it beat out Blockbuster by targeting the same audience and product (movies) and getting ahead of technology and consumer trends.

Consumers don’t have insight into technology development or company operations. Thus, new competitors can have a significant impact on investment returns.

Multifamily Real Estate Investments

Multifamily competitors can’t just spring up because of limited space, zoning, and permits. When new apartments are built, they’re almost always class A (luxury tier) apartment buildings.

Since the demand for workforce and affordable housing is rising, the risk of having a high vacancy in well-maintained class B and C apartment buildings is relatively low.

Risk #3 – Consumer Behavior

Stock Market

Stock market investors bet on the success of companies who create products for people to use. Facebook, iPhones, Happy Meals, and soap are all consumable products.

However, it’s impossible to predict the term length of those products’ and companies’ popularity. Blockbuster had a long reign, but when technology and consumer behavior changed, the company stagnated, dragging investors down with it.

Multifamily Real Estate Investments

When you invest in real estate, you’re investing in a basic human need that will never go away: the need for shelter. As long as humans have existed, we’ve required a roof over our heads, and that need has only strengthened over time, especially with rising population trends.

Risk #4 – Lack of Control and Transparency

Stock Market

Investing in stocks is like buying a train ticket. The train is leaving, with or without you. Whether you’re on board or not is up to you.

When the market is sailing upward, the ride is smooth and exciting. During a correction, a terrible, helpless feeling takes over. The conductor (CEO) is unreachable, and you better buckle up or jump off.

Multifamily Real Estate Investments

When you invest in a real estate syndication, you know precisely who the deal sponsor is, and you can reach out directly to ask questions and provide feedback. You will not get this type of access from the fund manager at fidelity.

Multiple buffers should exist to protect investor capital, such as reserves, insurance, and experienced professionals to handle the unexpected. Each deal should provide ongoing transparency, such as monthly updates and detailed quarterly reporting.

Conclusion

There’s certainly no one “right” way to invest. The key is to invest. Period.

Understand the risks going in and take action. That capital sitting in your savings account is losing value (because of inflation) every passing second.

So get out there and start achieving your “someday” today!