🚀 Why 2025 could be landlords' rebound year

👋 Hello, Best Ever readers!

In this week’s newsletter, landlords gain leverage, rate cuts are coming (for now), and student housing is still booming.

Today’s newsletter is brought to you by the all-new Best Ever Community, an exclusive, private network for serious investors only. The community launches later this month, and only a select group will be the first to gain access.

🚨 Don’t miss out: Join the waitlist today.

Let’s CRE!

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CRE HEADLINES

✂️ Trump vs. Rate Cuts: The Fed is likely to cut the federal funds rate by 25 bps today with another rate cut due for December, but President-elect Donald Trump's impending return to the White House likely puts the Fed on a path toward fewer rate cuts.

🥊 Voters vs. Rent Control: California voters decisively rejected Proposition 33, which would have let cities control rents on all housing types. The measure failed with 62% voting no and 38% voting yes, with over 5.4 million opposing votes counted.

🦹 Fannie vs. Fraud: Fannie Mae acknowledged multifamily loan fraud issues in its recent SEC filing, following several high-profile fraud cases including Aron Puretz's $54.7M and Boruch Drillman's $165M schemes targeting Freddie Mac and Fannie Mae.

☀️ Sun Belt vs. Affordability: Sun Belt cities are seeing reduced migration due to rising living costs, particularly housing. Cities like Orlando, Tampa, Austin, and Phoenix are reportedly losing their affordability advantage, with some Florida markets experiencing population declines.

🏢 Office vs. Multifamily: CRE posted consecutive quarterly gains in Q3 for the first time since 2022. Office and multifamily jockeyed for top position at 13% and 9% sales growth, respectively, while industrial remained flat and retail declined 27%. Overall sales volumes stabilized year-over-year and increased from Q2.

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POWER (BACK) TO THE LANDLORDS

The post-pandemic apartment construction boom sent shockwaves through the multifamily sector. The wave of new supply has pushed vacancies up and slowed rent growth, crunching landlords’ margins and eating into cash flow. Now, that tide appears to be turning.

The U.S. multifamily vacancy rate declined in Q3 for the first time in over two years, according to CBRE, dropping to 5.3% as renter demand finally outpaced new supply — factors that are expected to push vacancy down to its long-run average of 5.0% in coming quarters.

• A Nationwide Trend: 50 out of 69 markets tracked by CBRE experienced quarter-over-quarter vacancy rate decreases, up from 45 markets in Q2.

• The Outlier: Austin faces the nation's highest vacancy rate at over 15% (including new buildings), driven by a construction boom following corporate relocations like Tesla and Oracle.

• Looking Ahead: A record 672,000 new apartment units will be completed in 2024, but deliveries are expected to drop by 50% in 2025 and decrease further in 2026.

📣 “The first drop in vacant units in more than two years signals a crucial turning point in the multifamily sector,” CBRE’s Kelli Carhart said. “This boost will lead to increased investment activity in 2025 as improving fundamentals continue to drive investor confidence capital deployment.”

WHAT IT ALL MEANS

With the 1.2 million units added over the last two years beginning to fill up and the supply pipeline slowing, landlords could regain pricing leverage in 2025, especially if the economy remains strong and home prices stay high. With possible rent hikes on the horizon, the recent trend of increased rent concessions could also reverse, putting landlords back in a position of power.

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BEST EVER COMMUNITY

The Best Ever Community is launching later this month, and only a select group will be the first to gain access. Our mission with this platform is to build the single most impactful community for experienced commercial real estate investors and entrepreneurs.

🤔 Do you qualify?

The Best Ever Community is NOT a space for casual investors or CRE newbies. It’s an exclusive group for experienced GPs who have closed on at least two properties, operators who have managed at least two properties OR have $10M AUM, and LPs who have invested in at least one deal.

🎁 What You’ll Get: For $47/month (that's less than your daily coffee run), you'll gain:

• Insider access to CRE innovators

• Exclusive invites to live events, workshops, and masterclasses year-round

• Premium access to top-tier deals, partners, syndicators, and vendors

• A network of peers who speak your language and play at your level

• Forums with actionable advice and strategies from the brightest minds in CRE

This isn't just a community. It's your unfair advantage in the CRE game. 

The clock is ticking! ⏰ We’re welcoming the first members later this month, and spots are limited. The waitlist is already growing, so click below to see if you qualify and save your spot.

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TOP PERFORMING STUDENT HOUSING CAMPUSES

Since the Fall of 2020, several universities have consistently outperformed national averages in student housing metrics, maintaining near 100% pre-leasing rates and above-average rent growth through Fall 2024. RealPage's tracking of 175 core universities reveals these 14 schools as consistent leaders in both occupancy and rental rate growth:

• Appalachian State University

• Brigham Young University

• Clemson University

• Kennesaw State University

• Kent State University

• Purdue University

• University of Georgia

• University of North Carolina

• University of Notre Dame

• University of Oklahoma

• University of Pittsburgh

• University of Tennessee

• Utah State University

• Virginia Tech

These standout performers are predominantly state flagship universities in high-population-growth states. As of August, roughly 92.8% of beds at the core 175 universities tracked by RealPage were leased for the Fall 2024 semester.

_{🏠 DEAL OF THE WEEK}
ADDING $1M IN VALUE TO A 12-UNIT IN LESS THAN A YEAR

Karl Krauskopf and the team at Gold MF have added over $1 million in value to this 12-unit property in the past year, and they’re just getting started. Here's how they’re doing it 👇

🏢 Property Details: This 12-unit asset located in downtown Seattle, WA, was purchased in July of 2023.

💸 Finances: The property was purchased for $2,525,000. The team raised $1.2 million in capital and secured a recourse loan through a local credit union at 60% LTV with a five-year fixed and a 24-month IO at 6.3%.

💼 Business Plan: The team did a full interior remodel of each unit and installed in-house management. They replaced the landlord-paid gas heat with tenant-paid electric heat, and by doing so, the city of Seattle paid for window upgrades from single-pane wood frame to triple-pane vinyl frame. They also short-platted and sold off excess land to developers. Throughout the past year, they’ve worked with the other local owners to petition the city and the Dept. of Transportation to fully fund a noise wall and other street upgrades to improve tenant satisfaction.

🍾 Results: The investment is already distributing a higher-than-projected 5% cash-on-cash return. Preferred return projections are a 7% return on $1,250,000 or $87.5K/year. The property is currently valued at $3,550,000 after completion of the initial business plan. The team will reassess the valuation once supply is absorbed and rates have adjusted in two to three years.

If you have a deal you'd like to feature here, respond directly to this email with “deal breakdown.”

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FREE DOCUMENT DOWNLOAD

Everything You Need to Know About Investor Reporting

Ultimately, how often you send financial reports and the types of financial reports you send are up to you and the preferences of your investors. But sending them is non-negotiable as a GP. Here is a process you can follow to source the correct information and send effective investor updates that instill confidence and answer LP questions.