All Forum Posts by: Tyson Scheutze

In this week’s blog, I am turning it over to Cole Thompson. He uses his 25 years of experience to offer insight on the parallels between the market during 2007-2012 and today’s market.

As a seasoned professional in the residential construction and development industry in the southeastern United States, I have witnessed firsthand the rollercoaster ride of economic ups and downs over the past 25 years. Reflecting on the similarities between the financial challenges of 2007-2012 and the current market conditions of 2024 sheds light on the resilience and adaptability required to thrive in this dynamic landscape.

During the tumultuous years of 2007-2012, the southeastern US, like much of the country, faced unprecedented financial turmoil. Mortgage-backed securities were not a common household term, yet the collapse of the housing market and the onset of the Great Recession sent shockwaves through our industry. Consumers were left reeling from plummeting home values and credit markets tightened. Homebuyers struggled to secure financing, while construction companies grappled with stalled projects and diminishing demand. In these pressures, we saw the consolidation of the American Household. By this, I mean multiple generations under one roof. We must not forget the impact of gas prices, post hurricane Katrina. In the Charleston, SC and Columbia, SC MSAs (Metropolitan Statistical Area), it was business as usual until Hurricane Katrina. It was like a lever was pulled on purchases and buyer confidence. It was a scary time to say the least. When you look for advice and 40-50 industry veterans cannot help, it is a lonely place.

Fast forward to 2024, and while the economic landscape has evolved, echoes of those challenges persist. Today, consumers continue to face uphill battles in securing affordable housing and navigating the complexities of mortgage lending. The ripple effects of global events and economic policies reverberate through our region, influencing interest rates, inflation, and housing affordability. With this uncertainty, gas prices are once again on the rise as inventory numbers plummet in secondary and tertiary markets.

However, amidst these challenges, there are also signs of resilience and opportunity. Developers and construction companies have adapted their strategies (Build for Rent), embracing innovation (light gauge steel construction) and diversification (new product types) to meet changing consumer needs and market demands. Collaborative partnerships and strategic alliances have become paramount, enabling industry players to weather the storm and emerge stronger than ever.

As we navigate the uncertain waters of 2024, it is essential to draw lessons from the past while remaining agile and forward-thinking in our approach. By staying attuned to market trends, leveraging technology, and fostering a culture of adaptability, we can position ourselves for success in the face of adversity.

In conclusion, the parallels between the financial challenges of 2007-2012 and the current market conditions of 2024 serve as a powerful reminder of the cyclical nature of our industry. By embracing change, fostering resilience, and maintaining a relentless focus on innovation, we can overcome even the most formidable of obstacles and continue to build a brighter future for our communities in the southeastern US.

@Julia Hagen Glad the stories resonated. Most of my capital came from private, hard-money lenders and other friends and family who could see the opportunity in single family homes in our markets. 

Apologies for your experience @Todd Weber. That is not the experience we seek for any of our clients. Can I ask when you were a client of Auben? And in what market?  

We completely overhauled our operations a year ago because as we grew in size, we found we were not consistently and uniformly delivering the personal experience we desired. Our main focus  of the operational improvements included bringing in senior and experienced managers, providing more proactive communication updates and adding an investor hotline so as to ensure a more personal and communicative experience for our residents and investors.

Thanks again for the feedback and goo luck on your investing journey. 

If there is anything else you feel I should be aware of as an owner, you can reach me @ [email protected]  

In this week’s blog, I am turning it over to Auben Columbia’s Market Sales Manager, Chris deTreville, and his thoughts on what a 20-year scatter site residential rental professional thinks about new construction rentals and specifically intentionally developed (build-for-rent) rental communities.

Chris’ recent trip to IMN’s Build for Rent conference unexpectedly brought Chris back not only to his early real estate days, but also his high school days.

As Columbia Market Sales Manager, Chris points out below the iterative journey of change we all experience in high school and as a beginning real estate professional persists even at the highest level of high finance and development. No matter how much experience and capital you have, a dynamic debt and sales market always has a way of humbling even the most seasoned senior professional. Read below to hear from Chris:

Being a teenager is a difficult time, which most of us apply selective memory to. Your brain is going haywire and your body is simply trying to do all the changes and still fit into your skin. Though few express it outwardly, all teenagers are full of doubt. Yet inevitably, internally, you think everyone around you is doing it the right way and you are just fumbling along. Most teenagers think everyone has it figured out as they stay fixated on their shortcomings. The reality, of course, is that everyone else is feeling the same way. Some of your classmates and friends may be more vocal about expressing it or conversely be better at hiding it. In the end, we always discover everyone is just figuring it out through an iterative journey..

When I started my real estate career in 2006, I knew next to nothing about selling a house. I was a warm body in a model home selling spec homes in what turned out to be, in retrospect, a really crazy real estate environment. I had no idea that buyers were purchasing these homes with subprime mortgages. I didn’t even know what subprime meant until much later.

Turns out nobody else in the industry, including lenders, really understood the negative impact these loans would have on millions of people. We understand it now, as we always do with the benefit of rear view vision. But, during the boom and bust of the great housing bubble, everyone was caught in the frenetic pace. A similar frenetic pace to the one that has captured the last couple of years of residential rental investment and development

Nearly 20 years into my real estate career at this point, I can draw on that experience in order to have a much more measured approach to the business. But as I recently learned, even the most seasoned, senior real estate professionals and investors still have to rely on an iterative journey to success.

I recently had the opportunity to tag along with Auben Capital Partners founder, Tyson Schuetze, to IMN’s Build to Rent conference in Nashville this past week. Panelists discussed a myriad of topics, including financing, deal structure, product type and design. As expected, even how to best leverage AI for maximum efficiency was given airtime. Being new to the build-to-rent model, I was there to learn.

As I discussed with Tyson at the conclusion of the event, it was very clear that no matter the experience level or how many millions of dollars in capital a panelist has allocated to the build-to-rent business, everyone was there to learn.

It was restated many times how the model and asset class is very new, existing just a handful of years in a very dynamic market and economy.

Even though there were seasoned builders, investors, developers and lenders, not one panelist was able to draw from 20 years of experience specific to build to rent. It was clear they were all forging their own path, trying to figure out best practices, and unlike a teenager they were there to express and discuss those concerns and doubts outwardly so we could all benefit from the collective successes and mistakes of the group. One could see directly we were all drawing from our combined experience for a more measured approach to build to rent, which is on its own iterative journey to standardization.

@Will Gaston what we are seeing in Columbia is the same thing we are seeing in most of our markets. 

Recent winter months was the first time we have experienced typical seasonal slowdown since Covid. 

The market is normalizing which in the short term can feel a little unsettling, but given run-up of past couple of years, some normalization is needed. 

Lots of headwinds facing real estate, like the following: 

• Inflation
• Consumer Debt
• Lack of consumer liquidity-- renters don’t have first and last month’s rent, let alone a down payment to buy
• Owners interest-rate locked
• Oversupply of class A multifamily
• Stagnation of rent growth on assets aggressively underwritten at acquisition
• Maturation of term debt combined with stagnant rent growth against a backdrop of rising debt rates =investors unable to meet basic debt coverage service ratios on refinance
• Market normalization forcing operators and investors to rely on market fundamentals (recently) forsaken, while prioritizing expediency of deploying capital
• Institutional and local investors are both frozen by volatility and cost of capital and debt

All that being said, we feel good about B and C class assets we focus on and the markets we are in. let's connect soon 

Greetings BiggerPockets community,

My name is Tyson Schuetze and I am a 20-year SFR professional investor and manager.

I am a full-time investor and the owner/founder of Auben Realty, the southeast's first vertically-integrated full-service, investment brokerage. 

I recently founded Auben Capital Partners to focus my time and energy on raising capital.

Today, I lead a team of SFR experts who have transacted over 2 billion dollars in sales, completed over 30,000 renovations/developments and leased over 20,000 units.

However it was a long road to get to this point, full of lots of challenges and lessons learned.

Every week, I write a blog about my experiences as a long-term SFR investor and property manager who has has been fortunate enough to invest in many types of real estate in many different markets and many different market cycles.

My hope is my weekly blog will give others confidence to keep going and an easier journey to success.

I started real estate investing, while living in New York City and working as a leasing agent in my early twenties.

My first real estate investment was in Syracuse NY in 2005.

I relocated to Augusta, Georgia in 2006 to learn with a multi-family investor/mentor.

And then in 2009, I founded Auben Realty, which has grown from a small local shop to a regional presence with current locations in Chattanooga, TN, Columbia, SC, Greenville, Atlanta, Charlotte and Jacksonville.

Recently, Auben purchased a property management company in Kansas City to begin our Midwest expansion. This acquisition positioned us as one of the 10 largest single family property management companies in the country.

During the past 10 years, we have worked with a variety of large institutional clients in all phases of SFR including: acquisition/disposition, renovations, leasing and management.

However, Auben's model is deeply rooted in a strong local presence in each market.

Our goal is be local, while also offering an institutional grade service and back-end support.

I am excited to welcome two new divisions into the Auben ecosystem as of January 2024, Auben Capital Partners and Auben Development.

These divisions will allow Auben to continue to meet increased passive investor demand, primarily focused on raising capital for larger projects and investments, specifically portfolios of scatter site single family and new construction build-for-rent communities.

I love working and networking with investors, so please reach out and connect with me

Middle school dances and starting a business…

In many ways, creating a business is really like attending your first middle school dance. There is a foreign, awkward excitement that is hard to put into words. Many thoughts and actions lead up to the day. And then suddenly you are there–back against the wall, surveying the landscape–looking for anyone eager to give you a shot.

I’ve often struggled to describe the powerful combination of anxiety and elation of entrepreneurship but maybe I was not tapping into the right middle school memories, buried beneath braces and rejection.

When you start a business, and as you begin to realize people are not beating down the door to engage with you, a certain real pragmatism sets in. You have to be open to anyone! Anyone who is ultimately willing to look past your inexperience; anyone who is willing to prioritize your enthusiasm over your core competency. And so you work with/for (or dance) with whomever will have you. Friends, family, less-than-ideal prospects, any and all are welcome as long as they can help to get you out of the corner and off the proverbial wall.

If you are lucky and/or fortunate as I have been in business (and dancing–as anyone who has seen my wife dance can attest), you survive long enough to get another shot, another chance to show maybe, just maybe, you can learn a thing or two. You may never become Steve Jobs (or Fred Astaire), but, if you play your cards right, you get enough reps to get that innate awareness of your own frequency and rhythm and you begin to find music (and prospects) that suit your speed.

With this awareness, you understand that you will also never be on Dancing with the Stars but perhaps you can find a beat and venue that leads to real competency and proficiency. Maybe, just maybe, you can hang around long enough to say no to enough songs, to enough opportunities, you reach the rare air of becoming expert in a certain niche, industry, market and skill.

thanks @Katie Miller!

I wanted to take a moment and discuss some questions about SFR and respond with some specific trends we expect to see more of in 2024. Many of the topics below were hot topics for debate by SFR industry leaders at the recent IMN CONFERENCE in Scottsdale Arizona.

Institutional SFR buyers are moving on to other asset classes.

Nope. We think some of the easy money has definitely already been made, and we spoke with many people who said they were pruning and optimizing their portfolios, while also reevaluating what they buy and where they buy. But we believe SFR has a long runway as a solid asset class for years to come.

BFR will replace scatter-site SFR as the preferred vehicle for owning SFR.

Yes. We are leaning heavily into this statement. Some of the same organizations currently disposing assets are looking at new BFR communities in various stages of development. The reasons are the same as what has always made multifamily so attractive: uniformity, density, etc.

Now is a bad time to develop/build?

Not true. Supply chain issues seem to have largely normalized. The labor market is still challenging (and not showing signs of improving based on the escalating average age of most contractors). But as one participant said, given the difficulties of getting new BFR online (particularly capital restraints), those who can get new BFR developments to lease-ready status in the next year or two should be handsomely rewarded by a lack of inventory.

Multifamily’s wave will crest causing the asset class to struggle

Many different thoughts on this. Most reports say, given affordability constraints and overall market volatility, renters are staying put for much longer periods of time, reducing turnover. However you also have huge amounts of multifamily inventory hitting the market simultaneously. All of the product is nearly identical in target market reach (Class A, high rent). We see the party slowing down but see a lot of upside in Class B and Class C product which have not been able to make it out of underwriting for the past couple of years (and really has not been built for several decades, at this point).

Institutional buyers will return in 2024?

There were many hopeful SFR industry people at IMN in Arizona, desirous of a better pace for acquisitions in 2024. It wouldn't take much to beat 2023. But we remain cautious in our optimism as the capital stack requirements are still making it really difficult for large and small aggregator/operators to be able to craft the right deal structure. Unless rates lower it may be status quo. We hope to see some movement by end of Q2

Atlanta is losing its luster?

People still love the Southeast and its shining star, the ATL. But the market du jour is clearly Charlotte, with nearly every owner/aggregator we talked to interested in this market. It doesn’t hurt that the Charlotte MSA is now Statesville to Rock Hill, Hickory to Salisbury with coverage at all points in between. We also heard a lot of chatter and a lot of interest in some traditionally less sexy, midwestern markets like Kansas City, Columbus, etc.

Capital is coming in from the coast?

As acquisitions have slowed, there is much more focus on the day-to-day, including a lot of chatter about OpEx and the biggest issue for most fans of the Southeast: insurance. In addition to many insurance providers pulling out of the state of Florida, we heard of big insurance issues in coastal cities in South Carolina, Georgia, etc. That being said, many of these same markets are too strong to ignore but we heard a lot of people reconsidering what are the best coastal markets, with cities like Jacksonville replacing Tampa/St. Pete.

When I moved to Augusta in 2006, it would have been challenging for me to point out Augusta on a map. I knew it was in Georgia, not Atlanta, and home of the Masters. That was the extent of my local knowledge. When I moved to Augusta, I also had no clue I would grow to know Augusta better than any city I have ever lived in.

Scatter site single family rentals force you to cover a lot of terra firma in your operations. Initially, my time spent meeting the city of Augusta was “driving for dollars” looking for homes to buy to flip. As I referenced in an earlier newsletter, driving for dollars is the pursuit of driving “farm areas” (neighborhoods of interest) looking for abandoned and vacant homes. You are part Google Maps recording vehicle, part explorer, and part private investigator. When you are looking to buy, you are trying to search for things that others might not see.

The obvious signs are overgrown landscaping, stacks of newspapers in driveways, and junk in the yard. While looking for these things, you get to know the streets. Really, really well. You learn what locals in Augusta know, that the street Battle Row can go from $3 million to $30,000 homes in a mile’s drive. AI has a hard time capturing this reality. But locals know.

After I bought some initial properties, I learned the city even better. Running materials to job sites and checking on progress, and then I learned it again going to check on a problematic maintenance issue and viewing vacant homes that needed turn-renovations.

In addition to ample windshield time learning the city, I had a lot of local folks help me see the opportunity in Augusta. Amazingly, it was initially a lot of the non-native local folks (transplants) who saw the most potential and opportunity in Augusta.

Non-native Augustans like Justin, Don, Bernard, Scott, Bob and Sue knew that Grovetown was going to grow to be a lot more than trailers and cow pastures. They saw the potential in South Augusta even though there was a lot of crime at the time. Many of these people were also catalysts of the change

I was always most drawn to the urban core and met other transplant Augustans like Janie Peel, who knew someday/someway downtown Augusta was going to be more than a late night food and drink destination. This concept of local experts has been core to Auben since day one, but we don’t go it alone. We are consistently seeking more local experts to learn and grow from and with.