All Forum Posts by: Elizabeth M Williams

@Raju Balakrishnan have a read through these -

Surveying the Apartment Landscape For 2022 | GlobeSt

Institutional Investors Shift to Long-Term Hold Apartment Strategy | GlobeSt

@Paul Moore read his comments about that deal, too. Love that he dipped into his own pockets to protect his investors, too. No doubt you tell your investors that all investing carries some form of inherent risk, and the overwhelming majority, if not all, of our investor base have a background in investing already. Part of the process is educating them, answering questions, being transparent about both risks and upsides, which I'm sure you do. 

@Daniel Han

When asked about what could go wrong, I mention rents not being paid, poor underlying financials at the outset, unexpected expenses, to name a few. 

This is where getting into the right deal, with the right syndicator, can help to mitigate risk at the outset -

- picking the right asset class. Class A properties would be more vulnerable during a downturn, with no ability to add value, and no reserves built up (from renovated units and increased rents prior to a downturn)

- picking the right location - in a downturn, those demographics should go a fair ways towards protecting against losses, or at least significant ones. Markets that are growing in population, jobs, rents, and income - leveraging both demographic and economic fundamentals - all helpful risk mitigation factors

- working with syndicators who've either experienced or witnessed deals go south - syndicators who are savvy enough to be conservative in their projections, set aside reserves, have created realistic sensitivity analyses, have good banking relationships in place - investing with these types of syndicators, with a track record through ups and downs, helps to decrease risk. It's worth noting that the market recovered in 8 quarters during the last recession, and good syndicators will be agile enough to deploy a strategy to ride these troughs out - have a look at this-

U.S. Multifamily Lessons from the GFC | CBRE

- investing in funds - some syndicators offer a portfolio of assets to invest in, with the same underlying returns structure of a single asset deal. By investing in funds, you can further mitigate downside risk by being diversified across a multitude of geographies and/or assets. 

- investing in other assets - loads of other types of syndications to invest in - medical offices, self storage, warehousing, etc. On a personal note, we plan to invest in a self storage fund and a MF fund in 2022, and perhaps one individual deal. 

- investing in other asset classes outside of real estate - I know some people put all of their investment into real estate, but I am a believer in diversification, so that your entire investment portfolio isn't at risk during any downturns. 

- keeping some cash reserves - downturns mean opportunities for smart investors

Investing carries risk, as does not investing. It's super important to create a well-balanced portfolio, in alignment with your risk appetite. I have clients who I advise to not over invest with me, if they aren't also in other asset classes, particularly after understanding their overall investment goals. 

Working with operators who can navigate through a few down years without losing your capital also helps. Personally, I expect I will get a lot more hammered in the stock market (which is heavily manipulated, in comparison) in the coming years than in the syndication space, but none of us has a crystal ball. I also think the single family market will get hit first, and that assets like self storage have managed to hold steady through varying cycles.

Lastly, it's worth noting that stricter lending guidelines have been put in place since the GFC, and investors have become careful to make sure that deals they invest in aren't overleveraged, and that the operator's interests are aligned with theirs.

@Sam Wilson most welcome. I have also heard a lot, and thought a lot, about inflation, as well. Wrote this on the subject last month. 

The past few years have proven to be pretty turbulent, to say the least, and from an economic perspective, there is no end of opinions on what's coming next. Data is pointing to increasing inflation, and the stock market continues to be irrational & exuberant, making many investors fearful of a correction.

I know many investors like to be 'all in' in some form of investing, be it equities, real estate, crypto, gold, etc, but personally, I think that diversification is critical to protecting your assets. It's easy to become emotionally involved in our investment decisions, picking a favorite stock, or buying houses to flip in our neighborhood, or trading crypto because it's exciting, yet if we are really honest with ourselves, if we are investing to build wealth, are we really making smart choices? Are we taking on more risk than we should be, or conversely, are we being so conservative (or, refusing to look at data, over our opinions) that we are missing out on superior returns?

As a long time fan of rental properties, I have finally turned the corner, and plan to invest our future real estate allocation into multifamily syndications. But, given the concerns of looming inflation, I'd like to explain why multifamily syndications can help you both protect and grow your wealth -

1. 1.Multifamily syndications are not closely correlated to the stock market. Not only that, but commercial real estate, such as multifamily syndications, are even less affected by broader market sentiment than single family homes, further protecting investors from market volatility. If the hot housing market cools down, and if the economy and stock markets experience decline, multifamily syndications are a very attractive alternative, providing stable distributions for years to come.
2. 2.Investors are investing in physical assets, which appreciate during inflationary times. Unlike investing in stocks, properties are physical assets, with intrinsic value. Furthermore, the types of multifamily syndications we invest in, as well as offer to our investors, are value add, meaning that our syndicators acquire assets (generally off market) at an attractive valuation, renovate the units & common areas, implement well-reputed property managers, and increase rents to market rates, thereby increasing the properties' valuation on exit.
3. 3.Inflation creates further increased costs for construction materials, making newly constructed homes & commercial properties even less affordable (and in less supply) and existing assets more valuable. Not only does this drive housing costs up, but it also makes existing, renovated commercial assets very desirable for investors seeking consistent, stable income streams. REITs, DSTs, funds, institutions, large family investment houses, and high net worth investors are exactly the types of buyers who purchase these stable income streams when syndicators sell their assets.
4. 4.Multifamily syndications offer attractive long term income. When inflation sets in, interest rates tend to rise, making the cost of affordable single family homes even greater. But people still need a place to live, so rents often go up, due to increased demand for affordable housing, during times of inflation. And should there be any slowing down of the single family market, commercial assets, particularly in sectors such as multifamily, self storage, and mobile home parks, tend to be less correlated to the market sentiment, thereby further insulating investors from market downturns. Through market cycles, investors can enjoy stable income streams, for years to come, vs being exposed to a rehabber trying to flip a property, and getting caught in a downturn. Multifamily syndications offer a way to enjoy income, and syndicators can elect to 'wait it out' for favorable market conditions, if need be.
5. 5.Inflation creates greater rental demand, in a non-binary fashion. During times of inflation, increased interest rates & cost of construction are two drivers for an increase in rental demand. But another driver is overall cost-cutting. As Covid stimulus dries up, consumers will be looking to save their dollars, and moving to more affordable housing, in the form of rentals, in more affordable markets. As a single family investor, if your tenant decides to move to a more affordable area, you expose yourself to a vacant house, creating a less dependable income stream. Even if there is increased rental demand in your market (more on that in Point 6), if you're in a high rent area, the data is showing that more and more millennials, young families, and young retirees are moving to the suburbs, for a lower cost of living, safer areas, better schools, and job growth. By investing in a multifamily syndication, or in a multifamily fund, you are diversifying your investment across hundreds of units, thereby reducing your vacancy risk.
6. 6.Inflation can affect different geographical areas differently. To me, this is the most critical factor in your decision on whether or not to invest in multifamily syndications. It's the mantra of real estate - location, location, location!

Not only that, but commercial real estate, such as multifamily syndications, are even less affected by broader market sentiment than single family homes, further protecting investors from market volatility. If the hot housing market cools down, and if the economy and stock markets experience decline, multifamily syndications are a very attractive alternative, providing stable distributions for years to come. The trick is to invest in syndications whose rents will rise alongside inflation, while also maintaining high rental demand. Savvy investors will follow the data, and invest in markets expected to continue to grow, regardless of broader market conditions. Savvy, well-established syndicators are already doing this.

Final Thoughts

I'm always an advocate of being diversified. It helps me sleep better at night. Our portfolio is a mix of asset classes, designed to weather out most storms, including inflation. We have invested in syndications, personally, and will continue to do so for years to come. I've written about syndications as a hedge against inflation, but there are a number of other reasons investors love syndications, including tax advantages & the passive income streams, to name a few.

Decent, short read in the link below. As someone who raises capital for a select few syndications, I often get questions around rising interest rates, inflation, will the market crash, etc?

In my humble opinion, multifamily & self storage remain stable investments, and don't tend to be correlated to the single family market, and its vulnerability to changes in interest rates, which is why investors flock to commercial real estate niches such as these. Our opportunities tend to be oversubscribed within in days. Why? It's a repeatable formula, throughout market cycles (can hold for longer time horizon, if need be) - buy assets that need moderate renovation, in growth markets. Improve management, improve the assets, increase rents inline with market rates, but with tenant retention in mind, as well. Increase vacancies, as tenants like improved units/surrounds. Stabilize cash flows, sell to institutional investors or larger family offices, who are happy to buy these in-built cash flows for their investors. 

Why Multifamily Values Will Continue to Defy Gravity (multihousingnews.com)

@Benton Shortridge I also live in Dubai! Have you considered investing in multifamily syndications? I'm an SEC registered rep, specializing in capital raising for MF syndications. Sort of fell into it when looking into investing in a rental in the US. Spent several weeks digging into it and speaking with a ton of people, before investing, as well as getting so hooked that I got involved with introducing investors to these opportunities. We raise for 9 syndicators, and we cover Florida, as well. Happy to meet up for a coffee or have a zoom call to tell you about it, as we are actually listing our rental in Oregon in a month and a half, and will invest proceeds from the sale into syndications.

Also, I know that my CPA, Basit Saddiqi (who for some reason I'm unable to tag), has quite a few rentals in Florida, so he might be able to help, as well.

Agree, Phoenix has been very hot, every single deal we bring to investors are over subscribed within a few days, as we work with a great local operator there who focuses in that area, only. There are other well-established operators out there (we work with 9 in total), operating both in individual deals and funds, across a multitude of geographies. We also use 3rd parties to vet both the properties, the financials, and the syndicators. As SEC registered reps, we are required to perform a significant amount of due diligence on each deal and operator. 

Personally, I'm about to invest in one or two funds, for the broadest diversification, as well as a few individual deals. The location is, indeed, important. But the demographic data and financials are also important. So is the deal, the assumptions, the track history of the syndicator, whether or not the property was acquired off market, amongst other things. 

I also refer investors to other syndicators we don't raise for, if they operate in either a market we're not in, or an asset class we don't raise for. Plenty of opportunities for everyone out there. :)

We tend to work in Class B value-add, in markets set to grow for years to come, over 150 units plus, with a few exceptions, self storage, for example. I've seen a lot of deals out there, some fantastic, some I wouldn't touch with a 10 foot pole. 

@Paul Moore Thank you :)

I can relate to the shiny object investing, mostly in the stock market. I've switched my plan to CEFs & MF syndication investments for income streams & growth, continuing into retirement. To be fair, shiny objects are fun, and can teach us some big lessons. 
 

Will have a look at your post, too!

@Katrina Dividina this isn't a tenant, this is a trespasser. I would inform the seller that if they aren't out of the house by the 3rd, you're calling the police for trespassing.

Twenty years ago I bought a fsbo and seller told me the same thing. Got on the phone with a lawyer, who told me to call the police. Never needed to call the police, they got out. I hated it, because I'm a nice person, but they were horrible sellers.

You have no lease with them, so it's not an eviction. Sounds like you already closed, so the house is yours.

It's awful when people force us to step up and play hardball, but not everyone is nice, unfortunately, so you have to protect your own interest in these circumstances.

@E. C. "Stony" Stonebraker yes, I love that people in their 20s are becoming more financially literate! Wish I knew then, what I know now. I really admire the fearlessness of some of the new RE investors, their drive to really understand it inside out. And thanks to the select group of syndicators who've managed to develop a great business model, it allows people like us, who prefer to create passive income streams, to reap the benefits with them. :)

There is a quote I used to have on a post it note on my mirror, about 20 years ago – ‘All Unhappiness is Caused by Comparison.’ Now, I don’t subscribe to that, fully, 2 decades later, but I do know that we often compare ourselves to others, which often leads to feelings of inadequacy. And when we look at people who we deem successful, as measured by wealth, we tend to beat ourselves up because we have somehow failed to achieve that same level of success. And when we feel bad about ourselves, we do a few things – one is that we convince ourselves that we don’t really want that success, and that we are happy where we are; two, we bury our heads in the sand – we do nothing, or we eat, watch TV, drink, exercise, lots of different things to escape our feelings of inadequacy.

We also get into ‘analysis paralysis’ about which direction to go in, which leads us into a vicious cycle of doing nothing, and beating ourselves up even more.

When it comes to real estate, it’s hard for some to decide which path to take, and endless ‘How to Get Rich in Real Estate by Doing XYZ’ stories don’t make it easier for us to think clearly and take decisive action.

How about we try a different approach, one I use with clients in my coaching capacity? It has to do with really understanding yourself & your values, so you can then move towards the lifestyle that you WANT to have, not the lifestyle you think you SHOULD have. Why is this important? Because by taking the time for a little self-examination, it helps us align our values with our plans & actions.

Here’s a great exercise that I really encourage you to do for yourself. I use it with many of my clients. Spend about 15 minutes going through the list of values HERE (I have no affiliation with the site). Narrow it down to 10 to 20 values which you either now subscribe to, or aspire to subscribe to. Write that list down and keep it handy on your desk as a reminder of where you are now, and where you want to go, and I’ll explain what I mean by this by example.

There are patterns which emerge in this value selection, which are a reflection of who we are. If you value things like charity, teamwork, peace, and service, for example, and you are beating yourself up over either society’s, or your peers’ vision of what goals you SHOULD be accomplishing, then you aren’t operating in alignment with your values. Maybe becoming a real estate mogul wouldn’t suit you. You might find you’re not working in a job that suits you, altogether.

If you value ambition, wealth, status, and fearlessness, and are surrounded by people who are telling you that your dreams and goals are too big, then you are also not operating in alignment with your values, because what you really want to do is take calculated risks and trust in your own abilities. In either scenario, and there are many, you’re being influenced by limiting beliefs, and limiting beliefs lead to either actions that don’t sit well with us (as we aren’t living in integrity with our core values), or inaction, which leads us back to beating ourselves up.

Once you’ve got this list, you can start evaluating the role you want to play in your path to success (which, for many, isn’t defined by being rich, but rather, more financially secure). In the world of real estate, you have two fundamental options – do you want to be an active or passive participant?

Active participation means you are hands on. You deal with tenants, leases, financing, repairs, management, legal issues, sourcing properties, and renovation, construction, development, etc. Done well, you could become very financially successful in this model, and a lot of people LOVE this path, but understand that it does take time and energy, and sometimes involves unexpected time & financial hits. You can have simply one or two rentals, or build up a commercial real estate empire, but I highly recommend you consider the following – knowing your values leads to deciding what you want, which leads to aligning your life with what you want. What I’m saying is that while you see people becoming uber wealthy and working their backsides off to grow an empire, maybe that’s not YOU, and that’s ok. Or maybe you love swinging a hammer and doing DIY projects, or managing projects, in which case flipping single or small multi families might be right up your alley. Either way, the most truly content people I know are on the path that they chose for themselves, and that suits their own personal value sets.

OR…maybe you’re like me, a passive investor. I’ve flipped one house, about 20 years ago, and learned a lot of lessons. I liked the creative expression involved, and some of the hard work, but it just wasn’t me, and I think we ended up breaking even, as we bought a money pit via private sale. I knew then that I wouldn’t be a flipper. I’ve also been a landlord for over 20 years, too. I’m really becoming ‘over’ the whole thing. I’ve had great tenants and horrible tenants, but for me, I now value my time more, and am working towards creating income streams passively, so I can focus on doing other things that give me meaning. It’s not easy at times, because it means I need to put my trust in others to both protect and grow our money, but I’d rather spend the time doing the research on who I invest with, at this point in my life, than in being an active investor.

Our values change, and the exercise above is great to do every year. Personally, my pace has changed, and I’ve lived through the highs and lows of being a landlord, and for me, I now value safety, peace, and time to do other things that fall out of the scope of actively managing real estate. Could I be making more flipping houses? Maybe. But I’m making more in passive investing in multifamily syndications, averaged out over years, than I am with my rental properties, even including appreciation. I enjoyed the journey & lessons, but having really dived deeply into my own values, I know that this is the right choice for us.

The point is, do what feels right for you, and if you don’t know what feels right, take some time to figure that out. There is a reason people say to ‘go with your gut,’ because while some life choices look good on paper, they might go completely against what our instinct and intuition is telling us. And don’t forget, you can always change your mind later, as your values & wants change. In the meantime, you will win some, you will lose some. Enjoy the ride along the way.