In this week's episode of the Real Estate Investing Onpoint Podcast, Peter, Ron and Wade dive into the booming single family rental (SFR) and built-to-rent markets. They analyze recent data on institutional investment, discuss opportunities in different real estate locales, and share strategies for multifamily investing. Discover effective strategies for workforce housing, understand the trends shaping the industry, and learn how built-to-rent fits into the institutional model.

Here are some power takeaways from today’s conversation:

• Institutional presence in top vs bottom SFR markets
• Demand drivers fueling SFR growth
• Built-to-rent communities and the institutional model
• Strategies for workforce housing investments
• Nontraditional SFR investment platforms

Episode Highlights:

[15:00] Institutional Investors and Top Performing SFR Markets

A recent Moody's Analytics article, analyzing the top and bottom performing SFR markets, reported a lack of institutional investors in many of the top markets, including Rochester, NY and markets in the Mid-Atlantic like Baltimore and Philadelphia. Larger firms have faced challenges acquiring sufficient portfolios at scale in these urban markets, which often involve smaller, heavily renovated properties rather than newer construction. Developing at the required size to meet institutional return hurdles may also be more difficult in these areas compared to suburban markets in the Sunbelt.

[29:00] The Appeal of Built-to-Rent Communities

Wade provides insight into built-to-rent communities and why they appeal to both institutional investors and the group's investment thesis. He notes that developing new construction projects on vacant urban land fits their strategy of investing in areas where large institutional competitors are not active. Built-to-rent allows stacking units efficiently while avoiding issues like uncertain rehab costs. Wade also discusses how building from the ground up is more predictable than heavy renovations on older homes, though new construction experience is limited within the group.

[43:00] Emerging SFR Investment Platforms

alternative SFR investment platforms are emerging such as portfolio lease-backs and fractionalization. The group debates the challenges and opportunities of these models, including their ability to potentially attract new types of institutional capital to the sector. In portfolio lease-backs, a company leases and then subleases an entire SFR portfolio. This could appeal to investors seeking a true triple net investment. However, they also note the long-term risks over a master lease and how margins may need to be thin to make the deals work.

Resources Mentioned:

www.gsprei.com

Moody's Analytics - The Superstar of Today and Tomorrow, Growth and Opportunity in the Single Family Rental Market

Curious about rising interest rates, supply and demand, and the impact of institutional investors? Tune into this latest episode for a deep dive into the real estate investing industry as GSP REI partners Peter, Ron, and Wade discuss trends shaping the market, factors like interest rates, supply and demand, and the impact of large institutional investors on the housing market. They also provide an update on Wade's HUD property due diligence for an upcoming auction – plus, their Thanksgiving holidays and Christmas shopping plans!

Here are some power takeaways from today’s conversation:

• Their Thanksgiving celebration and holiday plans
• Wade’s strategy for upcoming HUD property auction
• The pandemic’s impact on the housing market
• The impact of interest rates on the real estate market

Episode Highlights:

[15:49] Wade Shares Strategy for Upcoming HUD Property Auction

Wade provides an update on his HUD property due diligence for an upcoming auction, detailing that they submitted their preliminary model that morning after diligencing around 1200 of the 1500 total loans being auctioned. He discusses their strategy of bidding on most Florida assets despite it typically being very competitive, with plans to bid on around 300 to 350 properties in that state. Wade also notes some markets they will avoid bidding on and that he will make some additional edits to their model over the weekend before submitting final bids.

[24:11] The Pandemic’s Effect on the Housing Market: Wall Street Investors vs. Homebuyers

• The intense competition between homebuyers and Wall Street investors in the housing market has resulted in unprecedented price surges. Homebuyers, with their longer time horizons, are willing to pay more for properties. However, there comes a point where further price increases become unprofitable for Wall Street and investors. Notably, Wall Street's focus has been on specific markets, including Atlanta, North Carolina, and Texas, with around 35% of purchases concentrated in just 11 zip codes. It is important to note that data may not accurately reflect homeownership rates as it may not account for all adults living in the homes. There’s also a rising popularity of builder rank communities, which offer lower-priced homes that attract first-time buyers. Ultimately, the primary factor driving high prices is the significant shortage of available housing supply.

[30:11] A New Default Cycle in Corporate Debt Sparks Questions about the Fed's Actions

Amid the headline of a new default cycle in corporate debt, concerns about the Federal Reserve's actions come to the forefront. Speculations arise regarding whether they waited too long or did too much in a short period of time, potentially resulting in an overcorrection due to the lag effect. Driving up rates rapidly doesn't yield immediate effects, and although recent data shows a shift in the opposite direction, the full extent remains uncertain. Additionally, economists warn that the repercussions of rate hikes may not be fully realized until six to twelve months later than anticipated, possibly burdening the economy more than expected. Notably, corporate bankruptcies have increased, signifying the impact of the interest rate environment on businesses. The consequences of these developments are poised to reverberate throughout the economy, influencing job markets and labor dynamics.

Resources Mentioned:

www.gsprei.com

Discover the secrets to decode local real estate trends, master data-driven tenant screening, and build a rock-solid portfolio for an everlasting triumph. In this episode, Peter, Ron and Wade discuss the impact of rising interest rates on the housing market and offer their predictions for where rates are headed in 2023 and beyond. They also share tips for effectively screening tenants, including checking car cleanliness, and discuss the benefits of using property management software to document communications.

Here are some power takeaways from today’s conversation:

• Examining interest rate trends and predictions for 2024
• The shifting real estate landscape from multifamily to single family
• Establishing boundaries and expectations for property management
• Essential checks for evaluating potential rental tenants
• Maintenance requests and communication with tenants

Episode Highlights:

[02:45] Examining Interest Rate Trends and Predictions for 2024

There is a misconception among some Americans that 3.5% to 5% interest rates are normal, when in fact historically, they are exceptionally low. As rates continue to potentially decrease, there may be individuals who choose to wait on the sidelines, anticipating further drops. It will be intriguing to observe how the data supports these potential reductions, and to unravel the underlying factors influencing this shift. With various elements at play, it is difficult to pinpoint a precise trajectory, but it is predicted that by the end of 2024, interest rates could reach approximately 6.75%.

[14:43] The Shifting Real Estate Landscape From Multifamily to Single Family

In recent years, the multifamily sector has experienced a surge in popularity, with many investors flocking to this market. However, various factors such as interest rates, new developments across the country, and repeated trading of properties have shaped this space. As a result, there is now a growing trend towards single-family properties as investors seek good deals and value. Observing the demand in the real estate market, some experts predict a shift towards single-family homes. Additionally, industrial properties, outdoor storage, and flex spaces have seen increased demand in recent years, particularly due to the effects of COVID-19. For investors who prioritize supply and demand dynamics, the allure of single-family properties may eventually lead them to this segment of the market.

[28:41] Essential Checks for Evaluating Potential Rental Tenants

• When evaluating potential tenants, it's crucial to conduct credit and background checks. Checking their credit scores, performing NTN reports for credit history, and looking for red flags like evictions or bankruptcies are important steps. Verifying income, liquid assets, and rental references also help ensure the reliability of applicants. These standard checks allow landlords to screen out risky tenants and select responsible individuals who will pay rent on time and maintain the property.

[35:37] Establishing Boundaries and Expectations for Property Management

Implementing software as a communication filter provides a crucial boundary when it comes to property management. By setting clear expectations from the beginning, including maintenance standards outlined in the lease agreement, and informing tenants about quarterly property inspections, boundaries are established and maintained. This proactive approach ensures that all parties involved understand their responsibilities and helps foster a successful landlord-tenant relationship.

Resources Mentioned:

www.gsprei.com

From cattle shows to Note Investing, don't miss this fascinating real estate journey of Wade Carroll where he shares fascinating stories from cattle to hotels, securities trading, and real estate investing. Gain valuable insights as Wade discusses his lessons learned in construction, property management, acquiring non-performing loans, and his outlook on single family rentals.

Here are some power takeaways from today’s conversation:

• Lessons from raising and showing cattle
• What he learned from his hotel business journey
• Wade’s experience in stock trading
• Strategies for urban redevelopment: seeking heirs and acquiring blocks
• Transition to 1031 exchanges and property management expansion
• Seizing opportunities in NPLs and single family rentals

Episode Highlights:

• [27:49] Unveiling Opportunities and Building Success in Urban Redevelopment
• Wade's quest for heirs in urban redevelopment exemplified his tenacity and ability to spot hidden opportunities. One standout instance involved a valuable corner lot burdened by $17,000 in back taxes, which Wade acquired by offering the owner's daughter $10,000 for financial relief. Within a year, he sold the property for an impressive $120,000, solely based on its undeveloped land value. Wade's relentless pursuit of heirs uncovered these hidden gems, revitalizing neglected landscapes and opening avenues for urban transformation. Simultaneously, Wade strategically recognized the potential of acquiring not just vacant lots, but also houses on a single block. Through tax sales and gradual transformation into rental units, he accumulated an impressive portfolio of 650 houses over eight years, solidifying his expertise in real estate development and paving the way for further investments in superior rental units.
• [35:22] Transition to 1031 Exchanges and Property Management Expansion
• Initially focused on flipping properties to developers, Wade's expertise caught the attention of California investors seeking to reinvest their real estate sales proceeds. This led him to venture into facilitating 1031 exchanges, enabling investors to defer capital gains taxes by reinvesting in like-kind real estate. With the funds from these exchanges, Wade shifted his strategy towards acquiring income-producing rental properties, leveraging a warehouse credit line to help investors purchase portfolios of 10+ properties each. Managing over 650 rental units and $70M in real estate assets for 66 passive investors, Wade's success highlighted how 1031 exchanges allowed him to scale up and gain invaluable experience in property management of single-family rentals.

[41:07] Seizing the Opportunities in Single-Family Rentals

• Wade recognizes the immense potential in single-family rentals (SFRs) as a lucrative investment opportunity amidst the housing supply shortage. Instead of selling acquired real estate owned (REO) properties, Wade has focused on renting them out to capitalize on stable monthly income from rents, which can offset the impact of higher interest rates. With valuable experience managing SFRs during the 2008 crisis, Wade has honed his expertise in property operations and maintenance. By partnering with non-profits to acquire FHA loans, he has been able to scale his SFR investments ahead of many institutional players. Through his collaboration with GSP, Wade leverages their capital and expertise to continue acquiring and managing SFR portfolios for long-term rental income and appreciation potential. He believes that large, institutional SFR platforms will play a crucial role in the future of real estate investing, driven by the growing demand for affordable and workforce housing.

Resources Mentioned:

www.gsprei.com

Are you struggling with the property management side of real estate investing? Tired of dealing with difficult tenants and maintenance headaches? In this week's episode, Ron, Wade, and Peter dive into one of the biggest challenges - and opportunities - in single-family rental investing: property management.

They discuss the pros and cons of managing properties yourself vs. hiring a professional property manager. They also debate the merits of local, specialized management companies vs. large nationwide firms. You'll learn tips for finding the right property manager to fit your needs and make your life easier.

Tune in to get their expert advice on how to overcome property management hurdles and maximize the potential of your single-family rental portfolio.

Here are some power takeaways from today’s conversation:

• The importance of adaptability to real estate trends
• The influence of property management on single-family vs. multi-family
• Short-term rentals and their potential in different markets
• Property management challenges and benefits
• The value of local expertise in property management

Episode Highlights:

[16:43] The Importance of Adaptability to Real Estate Trends

Wade believes that successful real estate investing requires adaptability, akin to a chameleon. He notes that while the past decade has seen a surge in multifamily trades, it may have already peaked, making profitable deals increasingly scarce. Despite the scattered nature of single-family properties, Wade prefers their simplicity over managing multifamily units or hotels. He argues that dealing with numerous staff like groundskeepers and front desk operators in multifamily investments can be more complex than managing single-family homes.

[23:43] Property Management: Single-Family vs. Multi-Family

Peter offers an insightful perspective on the general hesitation towards investing in single-family properties, attributing it mainly to the perceived challenges of property management. Many potential investors are attracted to real estate but deterred by the prospect of managing properties and dealing with tenants. This fear, he believes, is often rooted in past experiences where ineffective tenant screening or other operational missteps led to negative outcomes. Peter emphasizes that success in managing single-family properties at a larger scale requires one to be a competent operator unafraid of the inherent responsibilities. Conversely, the allure of multi-family investments often lies in the perceived ease of securing a professional property manager due to the property's size. This perception, he implies, could be influenced by various educational courses promoting the simplicity of syndicating multi-family properties. Ultimately, Peter suggests that the decision between single and multi-family investments often boils down to the individual's comfort and proficiency with property management.

[36:55] The Value of Local Expertise in Property Management

• Ron and Peter unanimously stress the significance of localized expertise in property management, arguing that a manager with comprehensive knowledge of a specific geographic market outperforms nationwide companies. This local familiarity allows for a more profound understanding of various factors such as rental and housing trends, maintenance issues, landlord/tenant laws, and business culture, leading to better decision-making and problem resolution. Their experiences suggest that investing in a qualified, community-rooted property management company can significantly alleviate challenges for real estate investors. They advocate for prioritizing convenience and compliance over minor fee differences by opting for a local property manager.

Resources Mentioned:

www.gsprei.com

Learn how to build strong foundations for your real estate investing and protect yourself every step of the way. Dive into this latest episode where Peter, Ron, and Wade share their hard-earned wisdom on real estate education and working with contractors. From perspectives on education programs to the importance of experience, vetting contractors to structuring contracts for protection – they cover it all! Whether you're a rookie or a pro, this conversation is packed with insights to help you navigate the real estate industry.

Here are some power takeaways from today’s conversation:

• The concept of learning by doing
• Vetting contractors
• Structuring protection in contracts
• Payment schedules
• Change orders
• More tips for working with general contractors

Episode Highlights:

[10:09] The Concept of Learning by Doing

Peter stressed the importance of hands-on experience for learning, highlighting that consuming content only goes so far without practice. Ron added that risk-taking and learning through doing were pivotal in his 20s, but acknowledged that the feasibility of such an approach varies with life stages and responsibilities, implying that established investors might need a different strategy. Both Ron and Wade acquired extensive knowledge in their field through experiential learning rather than formal education, using trial and error as a vital part of their learning process, despite recognizing it might not suit everyone's temperament. They concluded that a balanced blend of education from others' experiences and personal hands-on learning seems to serve investors best.

[18:37] The Power of Fundamentals in Real Estate Investing

Mastering real estate fundamentals before adopting advanced strategies is helpful. Such grounding in deals, collateral, accounting, and risk management forms a robust platform for continuous skill expansion and adaptability to evolving opportunities and markets. Wade underscored the need to grasp basic concepts such as financing, collateral expectations, general accounting principles, and risk management before venturing into more intricate areas. This foundational knowledge, he argued, facilitated his successful transitions across different asset classes over time.

[33:41] How to Manage General Contractors

When discussing vetting contractors, Wade emphasizes the importance of getting the contractor's general contractor's license, proof of liability insurance, and proof of workers' compensation. He says these three things are crucial from a liability perspective. Not having any one of these should be considered a red flag. He also mentions including a waiver of lien in the contract to help protect yourself, as well as splitting payments into sections with a final payment requiring an executed lien waiver before being paid. This helps ensure the contractor is not able to put a lien on the property.

[37:02] Navigating Contracts: Ron's Recommendations

Ron suggests drafting contracts with a no lien clause to deter contractors from placing a mechanic's lien on the property, even though enforceability might vary. He also advises setting benchmarks for payment schedules to verify work progression before additional payment and clearly outlining permit responsibilities. Furthermore, he emphasizes that contracts should restrict contractors from arbitrarily implementing change orders without sign-off to avoid unanticipated extra costs from unauthorized work.

Resources Mentioned:

www.gsprei.com

Today’s episode is all about construction execution. Peter, Ron, and Wade dive into important topics like vetting general contractors, managing construction projects, and tips for choosing the right GC. They discuss starting small with value-add projects vs new construction, how to find reliable subcontractors, and setting the right payment schedule in contracts. Learn from their experiences working with GCs over the years. Whether you're just getting into real estate investing or looking to refine your strategy, this episode is full of practical advice straight from investors who have done hundreds of deals!

Here are some power takeaways from today’s conversation:

• Interest rates and its impact on real estate investing
• Navigating the construction process as a beginner
• The functions of a general contractor (vs. a construction manager)
• The “walk before you run” strategy
• What is an asset management process
• How to navigate conversations with general contractors
• Tips for finding a solid real estate agent

Episode Highlights:

[02:43] Interest Rates and Their Impact on Real Estate Investing

• • Real estate interest rates are influenced by factors like tenure, liquidity in secondary markets, and the mortgage-backed security market. Recent data shows the tenure reaching a multi-year high of around 4.8%. It will be interesting to see how this affects mortgage interest rates and if the market reacts similarly to the past six months. Currently, interest rates have stabilized after a rapid increase earlier this year. In the present market scenario, with low supply and higher interest rates, rental prices may align with the interest rates if demand remains strong.

• [09:50] Navigating the Construction Process: Advice for Beginners

• • Entering the world of construction without prior experience can be risky. It is crucial to conduct thorough research and gain a solid understanding of the construction process. Starting with simpler new construction projects might be easier for beginners compared to tackling complex value-add properties requiring extensive renovations. New construction projects come with their own set of complexities such as approval processes, permitting, and zoning regulations. It is important to take it slow and gradually ease into construction unless you have a trusted general contractor who can handle the project. Mistakes are common, especially if you lack understanding of the construction process or entrust it to unreliable contractors.

• [21:58] Employing “Walk Before You Run” Strategy

• • The "walk before you run" strategy is a wise approach for real estate investors new to construction projects or new markets. It essentially means starting small and gradually taking on more as your skills and experience grow. In new markets where you don't have established relationships, only do simple value-add projects at first like cosmetic upgrades rather than major renovations. Only take on larger, more involved construction once you've built up competency in that area through smaller jobs.

• [34:55] Tips for Finding a Solid Real Estate Agent

• When searching for a real estate agent, reach out to your network of investors, lenders, property managers, and attorneys for personal referrals. Additionally, review recent sales in your desired neighborhoods and examine well-presented listings as a sign of a proactive agent. Prioritize specialists in the type of property you're interested in and interview them about their experience, marketing strategies, and track record. Read online reviews from past clients to gauge their communication style and work ethic. Ensure the agent is readily available during negotiations and consider an agent who also offers property management services for long-term investments. Ultimately, trust your instincts and continue searching until you find the right fit.

Resources Mentioned:

www.gsprei.com

Are you looking for new insights to help analyze real estate markets and level up your investment strategy? Gain valuable perspective for analyzing markets beyond surface data and focusing your efforts where you can add the most value. In this latest episode, real estate experts Peter Neill, Ron Lockhart, and Wade Carroll of GSP REI dive into an important discussion around understanding markets, strategies, and strengths.

Here are some power takeaways from today’s conversation:

• Comparing Coastal vs. Inland Real Estate Market Trends and Rental Potential
• Factors influencing market expansion and scale for property investment
• Financing strategies
• Location, strategy, and demand when making real estate investing decisions

Episode Highlights:

[02:55] Comparing Coastal vs. Inland Real Estate Market Trends and Rental Potential

In California, the real estate market showcases distinct patterns based on location. Coastal areas, such as California's coastline, have experienced a significant boom in property prices over the past few years, but these prices are now showing signs of slowing down. On the contrary, counties further inland are witnessing a continuous rise in property values, offering more affordability to potential buyers. This shift has led to increased transactions as individuals who were previously unable to afford coastal properties are now exploring options further inland. As rental property investors, we closely monitor these trends by assessing the rent-to-value ratio - dividing the annual rent by the property value - aiming for a ratio of 10 or higher. These metrics provide a straightforward approach to evaluating investment potential. In essence, it boils down to analyzing data points and predicting the cost to capital over a specific period, ultimately shaping our decisions in this ever-evolving real estate landscape.

[25:54] Factors Influencing Market Expansion and Scale for Property Investment

When considering market expansion for property investment, several factors come into play. First and foremost, there needs to be a strong demand driver in place to create the necessary market demand. While it is ideal to have this demand closer to your home base, it doesn't mean that executing in other markets is out of the question. The decision depends on a combination of factors, including the scale you aim to achieve. For instance, if you plan to become a major player, like with over 100,000 properties, it may be necessary to explore multiple markets. However, if your goal is to acquire around a thousand properties, it's feasible to focus on a single market, especially if it's a metropolitan area with high demand. Ultimately, the scale you strive for and the presence of demand are crucial considerations when expanding into new property markets, with proximity to your home base being an additional advantage.

[38:09] Understanding the Importance of Location and Demand in Real Estate Investment

Sometimes, people confuse the asset class and type with location when it all comes down to demand. While some may view certain areas like Baltimore or parts of North Philly or Chester as "bad" locations, you still have to consider demand and strategy. For example, affordable housing investments thrive in areas where there is strong demand for rentals of that nature. This principle applies to other commercial sectors as well. A retail space may appear ideal within a bustling corridor, but it may not be considered well-located. Similarly, despite the challenges faced by traditional office spaces, those situated in prime locations continue to thrive due to their advantageous positioning. The key takeaway is that understanding the relationship between location, strategy, and demand is vital when making real estate investment decisions.

Resources Mentioned:

www.gsprei.com