On the show today we talk… Multifamily Real Estate Market Update with Jennifer Beadles!
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Show notes: Multifamily Real Estate Market Update with Jennifer Beadles!
Jennifer is in East Mesa Arizona, Joe is in Park City Utah, and Julie is still rocking it in Ballard WA.
Jennifer owns properties in 8 different states, and does business by referrals. She also has AgentsInvest.com and a new software company that she’ll be launching with a rent algorithm. It will also have a crime map to help investors get to the best place to invest.
They are putting the finishing touches on the software and launching it at the CDA REI Investors Summit.
We want to check in on what’s going on with the current market. Thinking rents, financing, and more!
Overview of what’s going on…
The market has shifted massively! The Fed is trying to calm down inflation, and bringing rates up.
They’ve seen a cool down in the market as a multi family investor. A cool down on activity.
If you’ve started in investing in the last 2 years… you’ve probably done really well. But now the seasoned investors are coming back. Jennifer is always buying in every market, there are always deals. She’s making a ton of offers right now.
On the residential side… but are commercial loans assumable?
Yes
Are you able to lean on sellers
They are seeing some of it, but it’s deal dependent.
There are a lot more sellers that are wanting to put money in the bank right now. And creative financing.
Are you offering 3 options?
Is it stabilized or value add
Seller financed or wraps
Sellers partnering
What about a master lease or lease option?
With a master lease there’s not a predetermined price.
So many options right now!
On the commercial side there aren’t a lot of price reductions, but they want an offer.
On the residential side there are a lot of price reductions.
You have to be more of a problem solver. You don’t have to be the expert, you just need to know who to call.
Have any of them dropped off your list?
Jennifer doesn’t invest in WA state anymore because it became an unfriendly state to invest in. The states she’s in are landlord friendly.
Are you buying purely value add?
Most of the time she is looking for value add, but sometimes it’s just a good deal.
Jennifer tells a story about a deal in Michigan.
What are Cap rates in the Midwest
6.25-6.5 and can be improved to 8-9.
Do you have a rule of thumb for Cap rate spread
Always buy at a high Cap and sell at a low Cap.
Look at the potential exit Cap and be conservative. NOI is going to be so much higher.
What’s the debt service coverage?
1.3 in some of these markets. We are looking at 1.5 or 1.7, which is conservative.
Right now they are paying 7% for bridge loans.
How long is the term on bridge loans
12-24 months
What is your stabilized rate?
Most deals are 5.5, and she’s done some floats lately.
Have you added any new states?
Ohio and Kentucky and Michigan, Missouri.
People get so focused on getting that deal instead of long term management.
What are the top 3 or 5 things people should check?
Areas where areas are increasing not declining. What are the job opportunities in that market. There is a minimum population of 40k that is increasing.
Do you look at oversupply or undersupply of units?
The absorption rate is secondary. And wage growth. Is that increasing or decreasing.
Also, low crime rates are important.
Julie, don’t over improve the properties that you are buying, and then charging more than you should.
Julie challenges you to not over improve your properties, and identify the pivot times.
What are your times rent qualifications on tenants?
3 times, usually.
It’s also an indicator of… could you bring the rent up.
Jennifer tells a story about Arnold Missouri. Watch to see.
You can use demographics to predict where things are going.
Julie has been stung on a strip center. Maybe a density check would be good.
It’s like treasure hunting for real estate.
Who are the people that are in a little concern right now?
Refi and locking in a super low interest rate is gone. It will come back at some point. History increases itself.
You should be part of a group that is going to help you tell when to react to market shifts. This helps people to prepare.
If you missed the window…
Jennifer is always told she’s too conservative, and acting as if we are in a recession. So she’s kept her head above water.
She thinks that some syndicators are in trouble.
Julie has been looking for an apartment syndicator, but she love Spartan Investments because they are so anal.
What is the biggest issue that has come up with syndicator?
Julie has a deal with Spartan where a tornado came through. If your syndicator doesn’t have a story, run the other way.
Every investor should be doing deal analysis and underwriting. No deal is perfect and you want to know how to solve issues. And go into syndicators numbers. Everything!
How did you get started?
We stared with a JV partnership, and have actually gotten back into JV partnerships to help people tag along. These are deal dependent. We do underwriting and financing strategy, then we have capital partners, etc.
The deals can be very different.
What about credit score? Does that blend or what?
It really depends on the deal and the partnership.
The alternative is to put the partner at 19%.
You can’t get wealthy off a job, you have to get into this!
What is a bridge loan and how that works?
It’s a loan that gets you to stabilization.
Do bridge loans allow 2nd lean positions?
Most times, no.
The difference between JV and syndication is being active in the deal (for JV).
What do you think of the Las Vegas market?
There’s a lot going on there. It’s a non-income tax state.
What is your #1 rule for a market?
Population growth is NUMBER ONE!
What does landlord friendly mean?
It means you can enforce your lease.
Are you doing short term rentals?
No, it’s not in her wheelhouse.
What about corporate housing?
It could make sense.
She wants no part in the operations. She hires a property manager.
When is something recourse vs. non-recourse?
If you are in residential those are all recourse loans. Meaning you are personally guaranteeing the loan.
The non-recourse loans don’t have the personal guarantee.
The take away is that there are great deals out there right now!!
Why is that? And why does rents going up cause better deals?
Jennifer thinks it’s the media.
On the commercial side it’s easier. You can’t buy the property because the rents don’t cover the asking pricing.
How can people get into Jennifer’s world?
AddictedtoROI.com or AgentsInvest.com
Join us on our open discussion mastermind every Thursday at 11:30am PT by going to meetup.com/seattleinvestorsclub. We’d love to have you!
This was a FANTASTIC, information-dense podcast from two wicked smart women! Thank you Julie and Jennifer.
Thanks for letting us know!