👑 The king of U.S. job growth

👋 Hello, Best Ever Community!

In today’s newsletter, job growth surges in select U.S. markets, Joe Fairless reveals his top partner-hunting tips, and one investor illustrates how he’s getting 110% annual cash-on-cash returns.

Off we go!

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CRE HEADLINES

🔮 Interest Rates Below 3% in 2024?: UBS chief U.S. economist Jonathan Pingle projects the Fed will begin rate cuts in March and accelerate in the second half of the year, reaching under 3% by December.

😮‍💨 Rent Relief Expected to Continue: Renters finally found relief from rent hikes in 2023, a trend that will likely continue in the new year, even as job growth and housing demand remain high in many parts of the country.

📉 Apartment Starts Drop 33%: SFR builders are seeing a resurgence as multifamily developers struggle to get funding, resulting in starts for buildings with five or more units dropping 33.7% year over year.

🏦 $117B in Office Debt Coming Due: A total of $117B in mortgages associated with office properties will come due in 2024 with an unspecified number of them at risk of default as refinancing difficulties persist.

🌪️ ESG Presents New CRE Challenges in 2024: Climate captured global attention in 2023 as buildings, communities, and environments across the world were impacted by a shifting environment, putting ESG initiatives top of mind for 2024.

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THE KING OF U.S. JOB GROWTH

The U.S. job market rebounded in 2023 with 4.7 million more Americans employed as of November than in February 2020, according to RealPage. This job growth is geographically concentrated in southern markets, which attracted new residents with lower costs of living and, in some cases, corporate relocations.

Job growth is crucial when deciding where to invest in real estate as it impacts demand, population movement, and economic health. Though the economy took a heavy blow in 2023, the impressive rebound leaves some metros thriving.

👑 The Dallas/Fort Worth area has been the clear king of job growth over the past five years, with both sides of the metroplex earning spots on the list of top 10 job growth markets. Dallas has added over 450,000 jobs since November 2018 for a 17.1% increase while Fort Worth added more than 140,000, growing its employment base by 13.2%.

⭐ Two other Lone Star State metros — Houston and Austin — clocked in at Nos. 3 and 4 on the list. Houston added more than 260,000 jobs for an 8.3% increase, while Austin brought in nearly 250,000 and led the Top 10 list in job growth percentage at 22.3%. The Atlanta and Phoenix metro areas rounded out the top five, coming in at Nos. 2 and 5, respectively — Atlanta with more than 273,000 jobs added (a 9.6% five-year gain) and Phoenix at 240,000 (+11%).

🏆 Also making the list were the Florida markets of Tampa and Orlando, which each benefited tremendously from the work-from-home movement in the wake of the pandemic. Riverside (CA) and Philadelphia — the lone northern market represented — rounded out the list, joining Phoenix as the only non-southern markets to make the Top 10.

Why It Matters

🧐 It’s no surprise that many of these job growth leaders are also forecast to be among the leaders in apartment demand in 2024. Dallas is projected to lead the way with nearly 37,000 units (in demand), with Phoenix and Austin not far behind. Conversely, the three are also projected to lead the way in apartment supply in 2024. As multifamily investors search for deals in competitive markets across desirable Sun Belt metros, the inbound migration, job growth, and supply/demand figures for some of these markets will make them particularly appealing in 2024.

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FROM JOE FAIRLESS

While it is possible to perform all of the duties of the general partnership on your own, most apartment syndicators elect to partner up with one or more individuals, either on a deal-by-deal basis or to launch a full-fledged syndication business.

If you want to become an apartment syndicator, one of the first steps after educating yourself on the process is to seek out a potential business partner. The structure of this partnership and even the type of person/people you partner with will vary depending on your current skill set.

💭 What do you want out of a partnership? To create the ideal partnership, the first thing you want to do is determine what you specifically want out of the partnership. Overall, you want a partnership where:

1. The equity percentages reflect the time investment and role of each partner.

2. Each partner’s skill set complements the others.

3. Each partner stays in their own lane.

4. Each partner can get along.

5. Expectations are defined from the beginning.

🤝 What will be each partner’s role? In apartment syndications, the roles of the general partnership can be broken into seven categories, and each responsibility has a commonly accepted range of equity ownership:

1. Who will raise the equity?

2. Who will guarantee the loan?

3. Who will find the deals?

4. Who will perform due diligence on deals?

5. Who will asset manage the deals?

6. Who will pay for the upfront due diligence costs?

7. Who will do the upfront work required to create the foundation for the syndication business? 

💬 “You’ll want a business partner whose skill sets are complementary to your own. Start by honestly evaluating your own skill sets and desires to determine the role you’ll play in the business.” —Joe Fairless

👉 Discover more about the process of forming an ideal partnership.

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110% ANNUAL CASH-ON-CASH RETURNS

Tim Vitale doubled the value of this property in 16 months and is getting 110% cash-on-cash returns per year. Here's how he did it. 👇

🏢 Property Details: Purchased 24 units in August 2022 in South Carolina. Class C, 100% occupied.

💸 Finances: Purchase price was $910,000 with $0 capital raised. 

💵 Debt Structure: $850,000 bank construction loan — 5.75%, 18mo IO, 60mo balloon. $250,000 seller finance — 3.5%, 18mo IO, 60mo balloon. $68,000 out of pocket. 

💼 Business Plan: Interior renovations including flooring, cabinets, countertops, paint, and appliances. Exterior renovations including paint and landscaping. Extensive water/sewer and water main line replacements.

🍾 Results: 110% CoC return per year and 10% return on equity. Rents at the time of purchase were $525 and are now $745 (full pro forma rents are $820). The current valuation is $1.8 million.

Tim plans to finish renovations to minimize the gap on the loss to lease. 10 units are left to renovate at around $9,000 per unit. The property value will be around $2.2 million.

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

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GET THE BEST EVER PRICE OF THE YEAR

There's no denying it: CRE is poised to have another interesting year. But now is NOT the time to sit on the sidelines. 

If you plan to be involved in CRE in any capacity this year— from investing to capital raising — you need to be informed and connected. That’s why you need to be at the 2024 Best Ever Conference, April 10–12 in Salt Lake City.

We’ll tackle the issues most important to investors and operators today, including:

🧭 Where to invest for success in the next five years 
🔍 How to evaluate a sponsor and the risks of an operator (track record, deal terms)
🚩 How to avoid operator default 
💡 Strategies for minimizing and avoiding investment losses
🧐 How to make sense of today's lending environment
💸 How to get funding for properties that are financially challenged

Plus, you’ll be in the room with 1,200+ of the most innovative and successful CRE investors and economists, sharing ideas and building relationships that will help you mitigate risks and seize new opportunities. 

👉 Act today to get the best price of the year! Don’t forget to use coupon code 2024GOALS.

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FREE DOCUMENT DOWNLOAD

🤔 Why Create a Thought Leadership Platform?

If you want to achieve massive levels of success in multifamily syndication, and real estate investing in general, you MUST have a consistent thought leadership platform. But I didn’t wake up one morning and tell myself, “I’m going to start a YouTube channel, podcast, newsletter, blog, write a book, and create a mastermind group today.” Rather, I took it one step at a time. Here’s how.

👉 Download now!

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Have a Best Ever day!

—Joe Fairless