🚚 Where young renters are moving — and why

👋 Hello, Best Ever Community!

In this week’s newsletter, Gen Z migrates south, GPs submit their best offers, and one investor’s multifamily deal yields a 225% return in just 30 months. 

This week’s newsletter is brought to you by Ascent Equity, a real estate investment firm that helps accredited investors build wealth through strategic, passive investments in multifamily properties. Learn more about Ascent Equity here.

Onward!

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CRE HEADLINES

💸 Multifamily Absorption Surge: The multifamily market experienced record-breaking absorption, demand, and new supply in Q1 2024, despite challenges such as rising concessions and elevated debt costs.

🪲 Cicadas Invade CRE: Massive swarms of cicadas emerging across the U.S. pose significant challenges for commercial real estate, potentially causing costly damage that property managers and owners must prepare for.

📈 Cap Rates Rise: Apartment transaction volume fell nearly 50% year-over-year to $4.5 billion in April, while cap rates increased 50 basis points to 5.4%.

🚨 Chicago’s Office Crisis: Chicago is offering the most generous subsidies in the U.S. to convert struggling office buildings into residential and hotel properties in an effort to revitalize its downtown.

🚪 When One Door Closes… Despite an increase in retail bankruptcies and store closures, landlords are finding it easier than ever to quickly replace departing tenants with higher-paying ones.

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WHERE YOUNG RENTERS ARE MOVING — AND WHY

The Sun Belt is attracting new residents from across the country, and young people seeking job opportunities and affordable living are leading the charge. Here’s where they’re moving, why they’re moving, and what it means for multifamily investors. 

🏙 Trending Metros: From 2020 to 2023, the Dallas/Fort Worth metro area grew by 123,000 people aged 20–34, nearly matching the combined totals of Houston and Phoenix. Other trending metros include Atlanta, Austin, Charlotte, San Antonio, Tampa, Raleigh/Durham, Nashville, Denver, and Orlando, each adding more than 20,000 young adults during the same period. Meanwhile, metros such as New York, Los Angeles, San Francisco, and Chicago saw the largest declines during the same period. 

☀️ Why the Sun Belt? The Sun Belt region, which currently holds about 50% of the national population (335 million), is seeing rapid growth due to lower costs, favorable climate, and business-friendly policies, driving strong economic expansion in its cities. Over the past decade, total employment in the Sun Belt grew by 13 million (+20%) versus 6 million (+9%) in non-Sun Belt areas.

💸 Generation 'Rent': More than half of Generation Z prefers renting over buying a home. Gen Zers are expected to spend around $145,000 on rent by the time they reach 30 years old — 14% more than millennials during the same life stage — with rental costs accounting for approximately 27% of their income between the ages of 22 and 29. 

WHAT IT ALL MEANS

Over the past decade, the Sun Belt accounted for 80% of total U.S. population growth and is expected to grow by another 11 million (+7.3%) over the next decade, while many of its cities have homeownership rates below the national average. As Gen Z continues to age and enter the workforce, their higher incomes and rent-first mindset will continue driving rental demand, making them a key multifamily demographic.

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SUNRISE IN CHANDLER

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Introducing Sunrise in Chandler presented by Ascent Equity. Sunrise in Chandler is an exciting 177-unit value-add opportunity in the affluent city of Chandler, AZ. This Class B asset in a Class A location was secured at a significant discount and is already cash flowing out of the gate with over 80% of the units still in need of renovation.

Sunrise in Chandler is nearing its capital raising goal and will be closing soon! This opportunity is open to accredited investors only.

➡️ Discover more about Ascent Equity here.

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FROM JOE FAIRLESS

An experienced GP will perform underwriting on tens, if not hundreds, of deals before finding one that qualifies for an offer. And once they do, there is a four-step process for submitting an offer.

💬 Pre-Offer Conversation: Before submitting an offer, the GP should reach out to the listing broker and property management company to clarify any discrepancies or questions that arise during underwriting. Additionally, the GP should visit the property in person to assess its condition.

💵 Determine an Offer Price: The GP can usually determine the owner's desired sale price through the listing, the broker, or by estimating it based on market cap rates and net operating income. However, experienced GPs will set an offer price based on their own projected returns and investment criteria, regardless of the owner's desired price.

📬 Submit an LOI: The GP submits a non-binding letter of intent (LOI) to the seller, which includes the purchase price, down payment amount, earnest deposit, and due diligence timeline, and is prepared by their real estate attorney. After submitting the LOI, the GP may be invited to a best and final call with the sellers.

🤝 Submit a Formal Offer: If the seller accepts the GP's letter of intent or awards the deal after the best and final round, the GP submits a formal offer in the form of a purchase sales agreement. This legally binding contract, prepared by the GP's real estate attorney, outlines all the terms of the sale in detail.

👉 Discover more details on how to submit an offer here.

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MULTIFAMILY DEAL YIELDS 225% RETURN IN 30 MONTHS

Aaron Katz and team secured a 225% return for investors in just 30 months on this 200-unit apartment building bought in 2015. Here's how he did it. 👇

🏢 Property Details: The property, a 200-unit Class C apartment building located in Duncanville, TX (outside of Dallas), was purchased in July 2015. At the time of purchase, the property was 95% occupied.

💸 Finances: The purchase price of the property was $7,425,000, with $2.8 million raised in capital. The debt structure consisted of assuming a $5.6 million loan with a 5.77% fixed interest rate and a 20-year amortization.

💼 Business Plan: Although minimal unit upgrades were performed, a premium upgrade plan was proven successful on eight units that required complete rebuilding from the studs up after a fire. Third-party property management was brought in, resulting in increased occupancy and reduced delinquency. Rents were significantly increased by more than $200 per unit.

🍾 Results: The property was sold in January 2018 for $15,400,000, yielding a total return to investors of over 225% in just 30 months. The equity multiple was 3.25x, with average annual returns during ownership ranging from 12% to 14%.

If you have a deal you'd like us to feature, share it with us!

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FREE DOCUMENT DOWNLOAD

5-Part Strategy for Finding Unlimited Apartment Deals

By implementing this five-part approach for nine months, one investor was able to acquire his first apartment property, a 20-unit complex for $1 million, through one of his broker relationships.

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🙏 Thanks for reading!

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Wishing you a Best Ever day!

—Joe Fairless