All Forum Posts by: Levi Bennett

 It's pretty easy to get the 1% rule in the Short term and mid-term space. That's where most of my specialty is. There's also significantly more owner-control over return than any other type of real estate investment. You need to follow a few rules on the acquisition, and follow a few more on the experience/forced equity/hospitality side, but if you do it, it's about the highest returning equity in the business. 

Since I get almost daily messages regarding small multi-family opportunities in Charlotte and find myself repeating much of the same information on the phone during intro calls, I figured I would go ahead and put my experience into writing for others who are doing research. Particularly those from out of state and not familiar with the Charlotte (or Southeast) market. I also would love to hear (read?) feedback from successful small Multi-Family investors in the Charlotte MSA and Southeast to gain your thoughts, experience, and outlook on the current and future market for this kind of product.

First, allow me to define small value-add Multi-family, I speak with a broad brush.. anything legally zoned duplex up to 50 units (I'm excluding Class A-B big MF)

To set some context, most of the investors that reach out to me are not from Charlotte, or are not intimately familiar with the market here. So this post is to be mainly geared toward to help set expectations for out-of-state investors, and I'm hoping for some solid contributions from people who are actively (or recently) involved in successful acquisition/disposition of smaller MF in the Charlotte MSA (broker, owner, lender.. etc).

My goal here is to keep it real.

Many people have read books, or taken a class or signed up for a guru or coach on the benefits of MF investments, and certainly is evidenced by the recent rise of syndications in the MF space in the last few years. With this knowledge, it seems as though out-of-state investors are analyzing markets that have great job growth, high appreciation, low unemployment, low taxes, but are still "affordable" compared to standards in more expensive parts of the country. Most investors I talk to who find me here on BP are from New York/New Jersey or California or the Middle East. According to their research online, Charlotte ends up appearing fundamentally as an affordable option with great fundamentals. Right?

Here's the problem: Inventory. Or, more specifically, density.

Smaller multi-family is significantly more common in the Northeast, Midwest, and Western cities who had their economic boom in the roaring 1920s-60s and thus, tons of high density zoning was developed across the country (but not the South). This perception in the investment community is often with the presumption that cities like Charlotte, Jacksonville, Orlando, Tampa, Atlanta, etc, are all cities similar in population to other cities across the US.. but if the populations are comparable, what is the catch? The catch is that the populations are all recent.. recent as in, massive booms in the last 40 years when suburbs ruled the development world, and density didn't necessarily increase except in the most urban and highly commercialized sections of the city (city centers primarily, which is mostly class-A prime real estate).

So where does this leave us? Thousands of investors nationally and internationally, not from the South, see the growth, economic advancement, and solid fundamentals, and see the opportunity in Multi-Family without considering inventory available in these cities. This has created, since about 2016, an asset class of very limited MF properties in the Southeast that trade at unreal cap rates. Value-add opportunities in the form of Class D, C and B properties is one of the most desirable and heavily marketed asset classes in the country, and few people talk about this (which I felt the need to post this).

I have brokered several small multifamily properties in the Southeast. The reason I pulled back from my marketing to owners of these asset types, was when I began hearing that they were getting anywhere from 3-10 offers per week from would-be investors.. and that was in 2017. It has not slowed down. Many owners have received thousands of offers for their small MF properties in the course of a year.

I'm not saying it's impossible to get small, value-add MF in the Southeast, but I am saying that most people I talk to have no idea what they're up against and often have unrealistic expectations of what they can buy here for the money. From an ROI perspective, there is much more money to be made in development, or investing in the booming short-term rental market in the Southeast where laws are significantly less restrictive (particularly in North Carolina, where municipal permitting is illegal). This is where my niche has evolved. MF is still, and will always be very attractive, but most trade off-market and requires a huge time investment to build relationships with current owners. Most everything "on-market" is priced at an impossibly low cap rate and doesn't make sense for the average investor.

This is not to discourage the determined investor, but I only think it's fair that people realize the competition in our market for this asset type. I also want to suggest other ways of getting the 1% rule in the South (which is still achievable), and set some expectations for this interesting market and economy that we all find ourselves in.

I would love to hear the thoughts and comments of people investing in real estate in the Southeast and get some other opinions! Cheers.

To be clear, the big platforms do not charge the cleaning fees, the owners set the rate and place it on the platform, and whatever taxes for STR that are not paid by the tenant at the time of booking will come out of the owners pocket, which is why you see those charges.

It sounds like you're trying to get out of a cleaning fee primarily, which, I can tell you as an owner of an STR, I would not do regardless of the promises made. 

HOWEVER.. with all that said, an easy way to find direct bookings is to search for properties you like on the big platforms, and then message the hosts directly and ask for a direct booking link, or negotiate the rate. Some may go for it, some may not. Many STRs have a direct booking site that will save you a little bit of money, so it can't hurt to ask. The risk you run is violating your terms of service agreement with those platforms and being permanently banned.

Since I get almost daily messages regarding small multi-family opportunities in Charlotte and find myself repeating much of the same information on the phone during intro calls, I figured I would go ahead and put my experience into writing for others who are doing research. Particularly those from out of state and not familiar with the Charlotte (or Southeast) market. I also would love to hear (read?) feedback from successful small Multi-Family investors in the Charlotte MSA and Southeast to gain your thoughts, experience, and outlook on the current and future market for this kind of product.

First, allow me to define small value-add Multi-family, I speak with a broad brush.. anything legally zoned duplex up to 50 units (I'm excluding Class A-B big MF) 

To set some context, most of the investors that reach out to me are not from Charlotte, or are not intimately familiar with the market here. So this post is to be mainly geared toward to help set expectations for out-of-state investors, and I'm hoping for some solid contributions from people who are actively (or recently) involved in successful acquisition/disposition of smaller MF in the Charlotte MSA (broker, owner, lender.. etc). 

My goal here is to keep it real. 

Many people have read books, or taken a class or signed up for a guru or coach on the benefits of MF investments, and certainly is evidenced by the recent rise of syndications in the MF space in the last few years. With this knowledge, it seems as though out-of-state investors are analyzing markets that have great job growth, high appreciation, low unemployment, low taxes, but are still "affordable" compared to standards in more expensive parts of the country. Most investors I talk to who find me here on BP are from New York/New Jersey or California or the Middle East. According to their research online, Charlotte ends up appearing fundamentally as an affordable option with great fundamentals. Right? 

Here's the problem: Inventory. Or, more specifically, density.  

Smaller multi-family is significantly more common in the Northeast, Midwest, and Western cities who had their economic boom in the roaring 1920s-60s and thus, tons of high density zoning was developed across the country (but not the South). This perception in the investment community is often with the presumption that cities like Charlotte, Jacksonville, Orlando, Tampa, Atlanta, etc, are all cities similar in population to other cities across the US.. but if the populations are comparable, what is the catch? The catch is that the populations are all recent.. recent as in, massive booms in the last 40 years when suburbs ruled the development world, and density didn't necessarily increase except in the most urban and highly commercialized sections of the city (city centers primarily, which is mostly class-A prime real estate). 

So where does this leave us? Thousands of investors nationally and internationally, not from the South, see the growth, economic advancement, and solid fundamentals, and see the opportunity in Multi-Family without considering inventory available in these cities. This has created, since about 2016, an asset class of very limited MF properties in the Southeast that trade at unreal cap rates. Value-add opportunities in the form of Class D, C and B properties is one of the most desirable and heavily marketed asset classes in the country, and few people talk about this (which I felt the need to post this).

I have brokered several small multifamily properties in the Southeast. The reason I pulled back from my marketing to owners of these asset types, was when I began hearing that they were getting anywhere from 3-10 offers per week from would-be investors.. and that was in 2017. It has not slowed down. Many owners have received thousands of offers for their small MF properties in the course of a year. 

I'm not saying it's impossible to get small, value-add MF in the Southeast, but I am saying that most people I talk to have no idea what they're up against and often have unrealistic expectations of what they can buy here for the money. From an ROI perspective, there is much more money to be made in development, or investing in the booming short-term rental market in the Southeast where laws are significantly less restrictive (particularly in North Carolina, where municipal permitting is illegal). This is where my niche has evolved. MF is still, and will always be very attractive, but most trade off-market and requires a huge time investment to build relationships with current owners. Most everything "on-market" is priced at an impossibly low cap rate and doesn't make sense for the average investor. 

This is not to discourage the determined investor, but I only think it's fair that people realize the competition in our market for this asset type. I also want to suggest other ways of getting the 1% rule in the South (which is still achievable), and set some expectations for this interesting market and economy that we all find ourselves in. 

I would love to hear the thoughts and comments of people investing in real estate in the Southeast and get some other opinions! Cheers. 

Literally everywhere in Florida. There's a couple thousand for sale right now south of Orlando near Disney World that are all still making money and because of the buyers market, anyone buying would have huge negotiating power. 

To be honest Kaitlin, I would use their rental history as justification for your price. If it were me, negotiating on your behalf, I would use a cap rate system.. estimate a net revenue with the real gross revenue they provided, and then get a cap rate. I would shoot for a double digit cap rate to start. Also, airdna doesn't work as well when there are few comps. However, it's also very possibly (yay, likely) that they owners are underperforming. Most operators do. Find reasonable ways to improve the property (hot tub, mattresses, strung lights, professional photography, etc..). So much of rental return in the STR space is UP TO THE OWNER, and NOT the market. It's not like long term rentals in that way. You have more control, but with more control comes more mistakes by most people. However, if you grab it by the horns and maximize it's potential, you should do way better.

I've made my entire career analyzing/consulting/underwriting/brokering STRs in NC. I think what people need to realize is that Charlotte and Raleigh are both top 10 cities in growth in the whole country. That's a pretty amazing stat. Additionally, the UHAUL report just released for 2022 showed SC and NC as the #3 and #4 most moved to state respectively. 

There are two points I try to get my clients to consider when thinking about investing in their booming cities/state.. 

1) Obviously, with more people are more weddings, graduations, visiting family/friends that will want to stay somewhere fun and unique to the location (For NC.. think loft condos, woodsy cabins, etc..) I cannot stress the "uniqueness" factor enough when investing in an urban area. If you get a good opportunity on a property that is bland, or blends in with everything else and is low on the "unique" scale, consider making it a fully-furnished medium term rental. Most of my clients in Charlotte have switched over to all medium term rentals and are almost always rented with a way above market rate compared to LTR rates (and they're way easier). There is more to unpack there, but I'm actually not the biggest fan of investing in urban areas since it's considerably more competitive unless you're getting something very unique, or looking to capitalize on the high-demand space of medium term rentals.. which leads me to my next point..

2) Understanding the TYPE of people moving to your city, and what they like to do.. and then taking that information and finding where they will go on quick vacations.. For instance, in Charlotte, there are so many people who have moved here from up North and they brought their skis. The only respectable ski resorts anywhere near Charlotte? Banner Elk (Beech and Sugar). There's a reason prices spiked 50% there in 2022. It's because rentals have gone through the roof up there. Beach properties too have seen a huge surge in rentals and appreciation. There's a lot of new people moving to SC/NC and they want to see the whole state. Looking at the vacation areas that NC offers has been a very reliable investment strategy. There is a boom happening in NC tourism, and there are more opportunities than people realize. 

I'd be curious if you have updated your listings since the big algorithm change with Airbnb. MANY people have noticed a change, and most people on the short end of the stick didn't update their listings to reflect the new way that Airbnb was serving options to tenants on the app/website. This has created chaos with the algorithm management in all the 3rd party management because a big percentage of hosts never did anything but noticed a huge drop in bookings, but didn't change the prices. Obviously this affects Airbnb hosts more than any other platform, but if that is the primary platform, then I would guess this has something to do with some of the unpredictability. 

 My point here is that many drops in occupancy/revenue were related to the actual listing and the new algorithm that airbnb is using instead of price. People dipping lower to get bookings are often still frustrated. Meanwhile, people maximizing the algorithm change have RAISED prices and are still seeing more occupancy. So, it's not always about price in this case is my point, and there could be more going on here than just the 3rd party dynamic pricing software.

I've always loved Daufuskie but admitedly, I don't have experience there yet. I had some clients that were interested in going in on a property there, but they didn't get organized. Are you using a paid or free version of AirDna? The paid version will show you the actual comps they're using, as well as performance on each of those so you can see if the algorithm is skewed with some ridiculous performing one that isn't comparable to the one you're considering purchasing. 

My instinct tells me that you would want either a very small cabin, or a very large house to perform well. 2-3 bedrooms will likely underperform there from my experience, although I could be wrong. Since it's ferry-only, you want it to be self-sufficient and may want to offer more amenities than a regular bnb (like stocked pantry, etc..) and you may crush there. I typically warn people about beach properties being a first investment, but if you do it right, you can certainly do well. There are other markets that are more consistent tho and more beginner-friendly. 

Sorry if this isn't super helpful, but I thought it was an interesting post and I hope you find someone (preferably an agent that KNOWS STR and knows how to research and get real performance) to help you out!

I cut my teeth in real estate back in 2014 selling STRs around Disney. This area has a lot to choose from as it's the largest and oldest STR market in the world. I would strongly suggest working with an agent that knows it inside and out. I moved back to my hometown in Charlotte, NC, and broker STRs in NC now.. but I still have a lot of connections to the STR brokerage world down there, and I'm happy to have a conversation with you about it and set you up with someone that's been doing it for 10 years and knows that market better than anyone.

1st of all, every HOA is different, usually the higher HOAs have more amenities to offer your guests. Second, proximity to Disney is a HUGE part of performance. Windsor Hills is one of the oldest communities, and closest to Disney, but has some of the more dated amenities. Location in this case would probably trump amenities. It's very common to sell fully-furnished turn-key properties down there, but you need an agent that can hound-dog actual rental records and use it as a negotiating tool. This separates a regular agent from a great agent. You can also find many STRs that are underperforming and get a good price, and put in some work getting it into shape to be a "first-click" property and outpace your neighbors.

The name of the game at Disney is interior design. You do NOT want to skimp on this, because there are plenty of investors who have figured out that "high design" generates significantly more revenue, and you will be competing with these. So looking at the market overall, be sure you are looking at specific examples of the type of property you are wanting and comparing it to the top producing properties that are comparable to yours in size and location, and try to emulate what they're doing (in your own, better way) and you should outperform every projection. 

PM is another huge part of it. Whether you self manage or hire someone, it makes a big difference. When I was down there I spent a great deal of time building relationships with PMs and learning what they all did well, and what their strengths and weaknesses were.. you need an agent that has done that and can recommend a PM that will be best for the type of property you have. Not every PM is strong in every part of the market. So again, it depends.. Anyway.. lots to unpack there, it's a great market because it's consistent, but it differs a lot from almost anywhere else in the world, so be sure you're working with someone who knows their stuff.