💸 7 big mistakes most operators make

👋 Hello, Best Ever readers!

In today’s newsletter, an operations masterclass, Trump calls out the Fed, office rents diverge, and Nashville explodes.

Today’s weekend edition is presented by Ownwell’s best-in-class tax reduction services. Schedule a free consultation today and see how much you could save on property taxes.

👉 Also, join us and our special guest from Neutral at Noon EST on May 8 for a FREE live event — Multifamily's Next Frontier: Wellness-Oriented Sustainable Development. Register here to save your seat today.

Let’s CRE!

🗞️ NO-FLUFF NEWS
CRE HEADLINES

Rent Forecast: Nationwide apartment rents are projected to grow 2.3% in 2025, with South and Northeast markets leading at 3.4% or higher, while Gateway cities lag. Only Austin, Denver, and Phoenix are forecasted for rent cuts amid supply challenges.

Fed Pressure: Following a better-than-expected April jobs report showing 177,000 new positions, President Trump renewed calls for the Fed to cut interest rates, suggesting the economy is just in a “transition stage” of his administration's economic agenda.

Leasing Momentum: Q1 2025 showed 1.4% MoM growth in multifamily new lease trade-outs, the strongest in three years. The market has recovered from November's 4% decline to reach March's break-even point, while Q1 effective rents rose 34 bps, signaling strengthening conditions.

Investment Surge: Despite a 12% drop in transactions, Q1 CRE investment reached $93.5 billion, up 17% YoY. Multifamily led with $30 billion (36% increase), while industrial rose 24% to $22.3 billion. Only office declined QoQ, though pricing appears to be bottoming out.

Amazon Expansion: Amazon unveiled a $4 billion plan to triple its rural distribution network to 200 outposts by 2026, creating 100,000 jobs across America's least populated regions by the end of the year.

🏆 TOP STORY
7 BIG MISTAKES MOST OPERATORS MAKE

Operations are the unsung hero (or, to some, necessary evil) of multifamily investing. While everyone loves the thrill of finding the perfect value-add deal, it's what happens next that determines success.

During a recent workshop in the Best Ever Community, multifamily operations expert Andy McQuade — who has helped operators add over $100 million in value to their multifamily portfolios and deliver over $6.5 million annually in additional NOI — broke down how seemingly small operational choices add up fast. When you consider that every dollar saved in NOI creates $16 in asset value at a 6% cap rate, getting these details right can be the difference between thriving and barely surviving in today's market.

Here are Andy’s seven areas where operators are “lighting money on fire,” and how they can improve:

1. Poor Pre-Closing Planning: Failing to involve key vendors during due diligence walks prevents leveraging buying power, causes product delays, and increases costs. Get suppliers on board early to secure better pricing and avoid supply chain disruptions.

2. Over-Improving Properties: Installing luxury features in C-class neighborhoods where rent increases won't justify the expense leads to poor ROI. Match your improvements to the neighborhood's realistic rent potential.

3. Missing Available Grants: Not researching local, state, or federal programs for property improvements means leaving significant money on the table. Find vendors who already have relationships with grant programs to simplify access.

4. Dispersed Buying Power: Spreading purchases across multiple vendors prevents negotiating better pricing, delivery terms, and service levels. Consolidate purchasing to gain leverage and potentially secure extended payment terms.

5. False Economy Purchases: Selecting cheaper products that require frequent replacement or maintenance creates higher long-term operating costs. Consider the total cost of ownership rather than just upfront costs.

6. Misaligned Team Incentives: Using property managers with no equity stake who lack the incentive to improve NOI compromises performance. Consider offering equity to align property management goals with ownership.

7. Unrealistic Pro Formas: “Pro formas are largely a work of fiction,” Andy says. Creating projections with artificially low expense ratios and overly optimistic rent growth leads to underperforming properties. Be skeptical of expense ratios below 45% for older properties.

• BONUS — Reactive Maintenance: Failing to invest in maintenance-reducing products (flapper-less toilets, durable flooring) hurts NOI since every maintenance call has hidden costs beyond materials.

Other tips and takeaways to consider:

• Be wary of keyless entry systems in lower-class properties, as they create maintenance obligations

• Ensure painters don't charge hourly and make them purchase the paint to reduce waste

• Bring in specialists early (attorneys, CPAs, cost segregation) to optimize tax strategies and structure

• Challenge property tax assessments after closing to potentially save money

• Consider cost segregation up to three times on a property for tax advantages

WHAT IT ALL MEANS

Everyone talks about finding good deals. That’s just one part of the equation. Executing the right strategy with the right team is where investors win. Planning before closing, understanding the total cost of ownership, and leveraging relationships are key to preventing wasted capital. By addressing these common money-wasting practices, investors can significantly improve NOI, increase property value, and achieve sustainable returns, even in challenging market conditions.

📽️ The full replay of Andy’s workshop is available in the Best Ever Community. Apply to join today. For serious investors only.

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💰 CRE TRENDS
RECORD GAP BETWEEN ASKING AND EFFECTIVE RENTS

Despite signs of stability in the broader U.S. office market, with four consecutive quarters of positive net absorption and an 18% YoY increase in leasing activity, a significant disconnect persists between landlord expectations and market realities on the rental front.

• Record Asking-Taking Spread: The gap between asking and taking rents remained at a historic high of 11.1% in Q1, reflecting tenants' continued negotiating power amid the 19% overall vacancy rate.

• Minimal Real Growth: Average asking rents barely moved, ticking up less than 1% to $36.09 per square foot — just 1.4% above Q1 2020 levels and 17.9% lower when adjusted for inflation.

• Concession-Heavy Environment: Landlords across all classes continue offering substantial improvement allowances and extended free-rent periods, particularly in Class B/C properties where effective rents remain under significant pressure.

Looking Ahead: The bifurcation between prime office buildings (which saw vacancy rates 4.2% below market average) and the rest of the market will likely continue, with slower new supply potentially providing some relief as completions reached their lowest quarterly level since 2013. However, until vacancy rates meaningfully decline, tenants will maintain leverage in negotiations, keeping effective rents constrained despite modest growth in headline asking rates.

🗺️ MARKET SPOTLIGHT
HENDERSONVILLE, TENNESSEE, IN THE NASHVILLE MSA

Nashville has emerged as one of America's most dynamic real estate markets, experiencing 6.4% population growth over the past five years and ranking No. 4 in CBRE's 2024 U.S. Investor Intentions Survey. Consistently among the nation's best for job creation, income growth, and quality of life, it’s becoming a perfect storm for multifamily, as are its submarkets.

• Hendersonville, Nashville's Rising Star: Just 20 minutes northeast of downtown Nashville, Hendersonville benefits directly from Nashville's explosive growth. Nashville was recently named the No. 1 Market to Watch by CBRE, thanks to its steady population increases, booming job market, and growing appeal to corporate relocations and remote workers. As the city expands, high-demand suburbs like Hendersonville are experiencing their own surge.

• Strong Market Fundamentals: The median gross rent in Hendersonville is $1,647 as of March, compared to Tennessee's state median of $1,258, highlighting its premium market positioning and high renter demand. Investors have consistently seen rental growth above 5% annually, a trend that shows no signs of slowing.

• Continued Economic Growth: Nashville’s local warehouse and logistics labor force is projected to grow by 11.3% by 2034, creating more jobs, driving population growth, and ensuring sustained housing demand. Limited new construction due to strict zoning and geographic constraints has created a supply-demand imbalance, supporting rising rental rates.

• Vibrant Culture Driving Economic Impact: Nashville's robust cultural scene continues to elevate its national profile and economic strength. Visitor spending has now surpassed $10 billion annually and is projected to exceed $12 billion by 2027, fueled in part by the city's arts, music, and entertainment offerings. This cultural backbone supports higher population growth, rising housing demand, and greater economic resilience for all its surrounding submarkets.

For investors looking to capitalize on Hendersonville's growth, Viking Capital presents The Hamilton, a 232-unit Class B multifamily community with 97% occupancy. Combining strong in-place cash flow, favorable financing, and the built-in advantages of a discounted acquisition, The Hamilton stands out as a prime opportunity for investors seeking to capitalize on Nashville's ongoing path of progress while securing their capital in a resilient, growth-oriented asset.

👉 For more on Hendersonville and The Hamilton, read the full blog post here.

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WELLNESS-ORIENTED SUSTAINABLE DEVELOPMENT

Join us and our special guest, Nate Helbach, founder and CEO of Neutral, on Thursday, May 8, for a FREE live event — Multifamily's Next Frontier: Wellness-Oriented Sustainable Development. Discover the growing wellness multifamily niche, the advantages of mass timber construction, tax-advantaged investment opportunities in groundbreaking developments, and what makes wellness-oriented Midwest multifamily properties unique in today's market.

👉 Register below to join us at Noon EST on May 8 and learn how Neutral is pioneering innovative approaches to resident health and sustainable development while offering high-performing debt and equity investment options.