💰 LP investing has changed forever. Here's how.

🎃 Happy Halloween, Best Ever readers!

In this week’s newsletter, LPs get schooled, banks play with fire, and Nashville takes the crown.

But first … are you on the waitlist yet for the all-new Best Ever Community? This exclusive, private network (for serious investors only) is launching soon, and you MUST be on the waitlist to get in. No newbies, no tire-kickers. This is where CRE’s best and brightest come to share knowledge, grow their wealth, and get more deals done.

👉 Save your spot and join the waitlist today!

Today’s newsletter is brought to you by Viking Capital, which is proud to introduce The Townhomes at Bluebonnet Trails, a luxurious 114-unit 2021 build located in the Dallas-Fort Worth Metroplex.

Off we go!

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CRE HEADLINES

😣 Tax Tension: The CRE industry is concerned about potential tax changes ahead of the 2024 election, hoping to retain Trump-era tax breaks while Kamala Harris advocates for tax hikes on high earners.

⚠️ Dangerous Delays: Regional banks' "extend-and-pretend" strategy with troubled CRE loans has created a $400 billion maturity wall, with loan maturities now at 27% of bank capital, up from 16% in 2020. The NY Fed warns this increases systemic financial risk.

🤖 Philly Bans Bots: Philadelphia is now the second major U.S. city to ban landlords from using rent-setting algorithms like RealPage. The ban comes amid price-fixing lawsuits and carries penalties up to $2,000 per violation and possible legal action.

🛝 Still Sliding: Property values across CRE fell in September, dropping 1.9% compared to last year and 0.3% from August. Property values have now fallen for three consecutive months.

🚪 Opportunity Knocks: Oxford Economics predicts favorable CRE investment conditions over the next 12-18 months — led by led by industrial, hotel, and residential — forecasting that 80% of global CRE markets will deliver neutral or better returns from 2025-2027.

🏅 _{TOP STORY}
HOW LPS SHOULD BE THINKING IN 2024

The LP mindset has changed. Prior to the pandemic, you could take a shot in the dark and make money in real estate. Now, the advanced due diligence required to select the right deals with the best operators has LPs wondering what they should focus on to effectively place capital and make smart investments.

This week, our own Joe Fairless — who, in addition to having $2.7 billion AUM with Ashcroft Capital, is also a prolific LP — hosted a panel of seasoned LP investors featuring:

• Pascal Wagner: A full-time passive investor who has built a $150,000 cash-flow portfolio off 23 LP investments

• Nimesh Patel: Principal at Lion Park Capital who has invested in 24 deals as both a GP and LP

• Trevor McGregor: A master platinum coach for both GPs and LPs who also has diversified investments as an LP

Here are three key takeaways LPs should consider when evaluating investments in 2024 and beyond:

• Follow the Money: When looking at the PPM, according to Patel, you have to understand when the GP gets paid. If GPs are paid regardless of how the deal performs, it creates misalignment between GP and LP interests. The ideal structure is one where GPs receive the bulk of their compensation at the end of a successful project through sharing in the equity gains, ensuring their interests are aligned with the LPs throughout the project's lifecycle.
  
  📣 “If the GP is going to be getting their cash or their revenue for running the project, regardless of how it performs, that's a huge red flag,” he says.

• Mind the Split: In an investment environment where just about everything has changed, waterfall splits should be no different. Traditionally, according to Fairless, LPs have seen 70-30 splits. Now, some groups are offering 80-20 or even 90-10 splits. It just depends on where you invest.
  
  📣 "The waterfall split should be much more in your favor [as an LP] than it has been in the past,” he says. “Because it's harder to raise money right now. And so you have more leverage there.”

• Bet on the Jockey, Not the Horse: When asked what aspect of a deal is most overrated by LPs, Wagner had a surprising answer. “The deal,” he said. “People tend to overrate the deal itself because they like to sink into those numbers. But to me, none of that really matters before I've done thorough diligence on the sponsor."
  
  But in the new world of capital calls and paused distributions, when evaluating a sponsor’s track record, it’s important to look beyond the deals that have been done and focus on the deals that are being done.
  
  📣 “It's important to show the whole track record, not just the deals that were successfully exited two years ago,” Fairless says. “Make sure you're seeking out their entire portfolio, including current deals, and understanding what percentage of equity has been returned to date."

While the big question for most LPs remains whether or not this is a good time to invest, the real question, according to the panel, isn’t when, but where to invest. Wagner looks for the pain — “When one market is up, another is down,” he says — and runs toward it. That’s where he finds the deep discounts.

McGregor cautions his clients to use this time to evaluate who they are and their risk tolerance. There are always opportunities, he says, to stay within your area of expertise while strategically venturing into new areas for both profit and learning opportunities, as he has done investing in AI, blockchain, and crypto.

📣 "Real estate is one of the greatest ways to make money in America,” he said. “I don't think that's going away. But we all have range…. I've had some money lessons and I've been hit over the head a few times with a two-by-four. But there is no failure, there's only feedback. And as limited partners, we're always going to get feedback and we're going to be able to then take it and climb the next mountain with it."

👉 You can access the full webinar recording here.

_{🏘️ VIKING CAPITAL}
THE TOWNHOMES AT BLUEBONNET TRAILS

Viking Capital presents The Townhomes at Bluebonnet Trails, a luxurious 114-unit 2021 build located in the Dallas-Fort Worth Metroplex.

This newly developed build-to-rent community offers expansive floor plans at below-market rates, making it highly attractive to the key rental demographic in the DFW area, which tops the charts as the No. 1 city for domestic migration, growing at more than 53 times the national average.

With minimal new supply and a low-density design that combines the benefits of multifamily living with a single-family feel, The Townhomes at Bluebonnet Trails is a prime investment opportunity.

Click below to learn more about this investment opportunity and secure your spot.

_{🗺️ ON THE MAP}
TOP MULTIFAMILY INVESTMENT MARKETS FOR 2024

As interest rates drop and dry powder leaps off the sidelines, the question is becoming less about when to invest, and more about where. Enter Arbor-Chandan’s 2024 Multifamily Opportunity Matrix, which analyzed 50 major U.S. metros' economic strength and projected resilience based on affordability, population growth, desirable climates, and other key factors to determine the top markets for multifamily investment.

Here are the Top 3:

• No. 1, Nashville, TN: The Music City has been singing in 2024 thanks to strong fundamentals, favorable taxes, and high relocation rates. The city's population grew 1.5% in 2023, triple the national average, driven by its magnetic culture and strong economy. With healthcare, tech, and tourism leading the way, Nashville owns the lowest unemployment rate (2.5%) among major U.S. metros.

• No. 2, Phoenix, AZ: Despite increased supply that slowed rent growth, Phoenix follows Nashville atop the list, led by a 3.1% unemployment rate, which outperforms the national rate of 4.2%. The city's emergence as a semiconductor manufacturing hub has created skilled jobs, boosting housing demand, and despite new supply, rental vacancy rates fell 3.4% over the past year.

• No 3., Austin, TX: Austin ranked third in high-opportunity markets, largely due to its posting 2% annual population growth for the 13th straight year — something no major U.S. market has accomplished since 1960. Texas's lack of state income tax and its status as a tech and business hub has helped Austin draw an above-average share of renters under 35.

The Best of the Rest: Jacksonville and Dallas rounded out the top five, while Raleigh, Indianapolis, Kansas City, Columbus (OH), and San Antonio made up the rest of the top 10.

_{🎟️ BEST EVER CONFERENCE IX}
FINAL ROUND OF EARLY BIRD TICKETS NOW OPEN

We’ve decided to open one last round of Early Bird tickets TODAY, OCTOBER 31.

But there's a catch…

We're offering priority access exclusively to those who are on the waitlist. So if you want a chance at these limited early bird tickets, get on the waitlist now.

Ticket sales will CLOSE at midnight on Wednesday, November 6 OR when we sell these remaining Early Bird tickets — whichever comes first. When these tickets run out, prices will go up. So click below now to get on the list today!

_{🏠 DEAL OF THE WEEK}
$3M VALUE INCREASE AND 1.72X EQUITY MULTIPLE IN 2 YEARS

Ken Gee and the team at KRI Partners added $3 million in value to this property and gave investors a 1.72X equity multiple in just two years. Here's how they did it 👇

🏢 Property Details: This 75-unit, C Class, townhome-style asset located in Orange City, FL, was purchased in January 2019.

💸 Finances: The property was purchased for $4.95 million. The team raised $2.3 million in capital and secured a $3.15 million Freddie Mac SBL (small balance) loan with a 5.38% interest rate.

💼 Business Plan: The team made a variety of exterior and interior improvements, which included adding a dog run, painting units, cleaning up the playground, renovating the leasing office, power washing the exterior, replacing the front sign, and repairing fences. They were able to raise rents on average by $155.

🍾 Results: The property sold in March of 2021 for $8 million. Annual ROI was 36% over a two-year hold period, and investors realized a 1.72X equity multiple on their investment.

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

_{🎓 EXPERT RESOURCES}
FREE DOCUMENT DOWNLOAD

5 Step Process for Securing Passive Investor Commitments for Apartment Syndications

This document guides you through the 5 step process for securing financial commitments from passive investors after an apartment deal is under contract in order to cover 30 - 40% of the project costs and close on the deal.