Multifamily Market Overview with Beau Beery

On This Episode of Peak Market Watch...

Multifamily Market Overview with Beau Beery

Beau Beery, CEO of Beau Beery Multifamily Advisory, and Anton Mattli will dive into Beau’s knowledge of the current state of the multifamily market.

 

Episode Highlights:

  • State of multifamily market 

  • Changes in transaction volume, cap rates, taxes, and insurance, and more.

Need Multifamily or Commercial Real Estate Funding?

Get in touch with our multifamily financing experts now and get a free loan quote!

Show Host

Guest Speaker

Connect with Beau Beery

VIDEO TRANSCRIPTION

 

00:00

franchise with partners

00:02

i exclusively did multifamily only since

00:05

2010

00:06

i sold that firm back to my partners in

00:09

2020 and just went solo into

00:11

multi-family advisors with myself and my

00:13

staff members

00:15

we cover the northern half of florida

00:17

from orlando and winterhaven and

00:20

lakeland

00:21

all the way up to tallahassee

00:23

jacksonville daytona

00:25

gainesville ocala all those markets

00:28

i do anything over 10 units conventional

00:31

or student housing

00:33

and occasionally i’ll do development

00:34

sites

00:36

very good

00:37

uh so

00:39

when we talk about the markets obviously

00:41

it’s all of uh northern and central

00:45

florida

00:47

except the tempo area and i think

00:49

orlando you’re covering too but

00:53

maybe you can tell us a little bit the

00:54

differences between these

00:56

these main markets that you’re covering

00:59

yeah sure

01:00

so the i mean i guess you can start with

01:03

um i you know the the northern half when

01:06

you remove orlando

01:08

a lot of them have the same metrics

01:10

meaning the same closing price as a unit

01:13

the gross rent multiples a lot of the

01:15

rents are the same it’s amazing i mean

01:17

even from jacksonville to tallahassee to

01:19

gainesville to daytona all those markets

01:22

trade around the same as a matter of

01:24

fact if you lump them all together

01:27

the average closing price a unit right

01:29

now in the northern half of florida not

01:31

including orlando and this is across

01:33

class a b or c

01:36

is 85 000 a unit right now right and

01:39

that average rent in place is 893 a

01:43

month

01:44

um the average size unit is about 812

01:47

square feet

01:49

the average age is a late 1970s

01:53

versus an orlando slash tampa

01:56

now keep in mind obviously it is a

01:58

larger market it has more population it

02:00

does have more jobs but the metrics are

02:04

a little bit insane so for that same

02:07

those those same uh metrics

02:10

you’re closing at an average of a

02:12

hundred and ninety eight thousand

02:14

dollars a unit in those markets if you

02:17

can imagine

02:18

um and now now the the average rents are

02:22

about 1325 a month

02:25

uh you’re closing at about 198 dollars a

02:29

square foot which is amazing

02:32

and the average transaction though

02:34

instead of being late 1970s is late

02:37

1990s

02:38

right so a 20-year newer product now we

02:41

can draw we can drive into class a’s b’s

02:44

and c’s and we can talk about that

02:46

um but in general obviously the market

02:48

is very hot the market market is very

02:50

high hot especially from a pricing

02:52

standpoint

02:53

because basically you have you have low

02:55

interest rates and you have a super low

02:57

supply of assets to come on

02:58

now the reason though there’s a low

03:00

supply of assets that come on is a

03:02

couple things number one

03:04

in november and december of 2020 there

03:06

was a huge number of sales

03:09

in fact 26 percent more sales happened

03:12

in november december 2020

03:14

than november december of night 2019

03:17

and the reason that happened was because

03:19

of the presidency we didn’t they didn’t

03:20

know who the president was going to be

03:22

didn’t know if capital gains was going

03:24

to go up didn’t know what was happening

03:25

with the 1031 exchanges

03:27

and so those who might have waited until

03:30

2021 went ahead and said hell let me get

03:32

let me go ahead and cash out now okay so

03:34

a whole bunch of transactions happen

03:36

november december that would have

03:38

happened in 2021.

03:40

then in january which is the election

03:42

month obviously nothing happened then

03:44

when normally january and february

03:46

is where a tremendous number of listings

03:48

come on in fact i usually tell a lot of

03:49

my customers let’s not come to market in

03:52

january because no matter how good your

03:54

asset is you’re going to be competing

03:56

against all kinds of other assets right

03:58

but what happened in january and half of

04:00

february was nothing came on

04:02

and so as a result as of mid-march and

04:06

we’re working on the new closings now

04:09

but as of mid-march

04:11

with orlando included there has been

04:14

only

04:16

14 closings now i did just look at

04:18

another 10 so i think it i think through

04:21

march

04:22

we’ve had roughly 24 25 closings

04:27

in the entire northern half of florida

04:29

over 10 units

04:31

i’m not even talking about over 100

04:32

units over 10 units

04:35

roughly 25 closings in the entire

04:36

northern half of florida now i will say

04:39

in the last 45 days so call that you

04:42

know call that mid you know call it

04:43

march and april

04:45

the number of bovs that i and my broker

04:48

friends have done has skyrocketed then

04:50

our listings have gone up

04:52

you’ve probably all seen this who are

04:53

listening to this podcast you’re

04:55

starting to see a lot more listings come

04:57

on

04:58

which means that may june and july

05:01

the number of closings will get back up

05:03

there now we’re not going to be at 2018

05:06

and 2019 levels in terms of number of

05:08

closings because what’s happened is in

05:11

the last trailing three years we’ve had

05:14

a little over 30 percent of the

05:16

inventory trade

05:18

right now it what happens is so anywhere

05:20

between six and ten percent of inventory

05:25

typically trades

05:27

per market per year

05:29

but we’ve had roughly 30 in the last

05:32

call it three years plus the four months

05:34

in uh in 2021

05:36

and so you might say okay well beau well

05:38

so there’s 70 percent of the inventory

05:39

that hasn’t closed but you have to think

05:42

how many of that 70 percent has already

05:44

refinanced right probably another 20 has

05:48

already refi in the last 12 to 18 months

05:51

and you can’t buy those because the

05:52

diffusion is going to be too high

05:54

and then how many of them are owned in

05:56

long-term funds so no matter how big of

05:59

a price you bring them they can’t

06:00

entertain your offer anyway

06:02

and how many of them are in locations

06:04

that you probably wouldn’t buy anyway

06:07

and how many of them are owned by a

06:08

person who would sell but they’re the

06:10

kind of person who says this is my price

06:12

and the price is absolutely ludicrous

06:14

right so when you get down to it the you

06:17

know the reason there’s not a whole lot

06:18

of stuff that had come on the market

06:20

and therefore that’s why prices have

06:22

gone up is because

06:23

most of the most of the deals that that

06:25

can sell have sold

06:27

right and then the ones that do come on

06:29

the market they know they’re at peak

06:31

pricing

06:32

so there’s there’s no way around at

06:34

anton you’re going to have to you know

06:36

there’s always going to be multiple bids

06:38

um there’s always going to be a dog and

06:39

pony show you know you have to put your

06:41

best foot forward and there’s a bunch of

06:43

things you can do to

06:45

to make yourself more attractive and

06:46

there’s a bunch of things you can do to

06:47

make yourself less attractive

06:50

but

06:51

you know off market you know quote

06:52

unquote off-market listings don’t really

06:55

exist i had that that word gets thrown

06:58

around a lot and if you want i can

06:59

define for you anton what

07:03

what off market means to a lot of people

07:06

but what it actually is in practice

07:09

yeah yeah very good point we we see that

07:12

all the time

07:13

so many

07:14

newcomers to to the to the game so i got

07:18

an off market deal right and

07:22

we we already know that that same deal

07:24

has been has been shown to

07:27

dozens of orders by multiple brokers

07:31

correct

07:33

you know brokers are fantastic and

07:35

making an investor feel special hey

07:38

listen i just got a call from seller sam

07:40

by the way he’s thinking about listing

07:42

this next week i’m the only broker he’s

07:43

talking to we got to take a run at this

07:45

right

07:46

but broker’s had that conversation

07:48

dozens of times

07:49

it doesn’t make any sense for any seller

07:51

on the planet

07:52

to sell to one human being to have to

07:55

give one human being who he doesn’t know

07:58

a chance at buying his property and if

08:00

he does if he’s any good that seller is

08:02

going to want you to pay a premium

08:04

for the right to not go to market right

08:07

and for a broker it makes no sense for

08:08

any broker to talk to one human being as

08:11

a buyer

08:12

right so if i if a seller called me and

08:14

said hey beau you know we’re thinking

08:15

about list we’re thinking about selling

08:17

our asset we don’t want to list with you

08:20

we don’t want it on all the websites

08:22

but you really are the only guy we’re

08:24

talking to we do you want to take we do

08:26

want you to take it to our to your

08:27

database

08:29

then it doesn’t make any sense for me to

08:30

just call anton

08:32

and say hey i got this opportunity why

08:34

would i do that to myself right i’m a

08:36

race against the clock i need to show my

08:38

settler that i’m talking to major buyers

08:42

so i promise you it is

08:44

extremely rare

08:46

that buyer bob

08:48

happened to call seller sam

08:50

and seller sam has never talked to any

08:52

broker ever or any other seller and

08:55

buyer bob caught seller sam on the best

08:58

day of his entire life

09:00

and somehow convinced him it makes more

09:02

sense

09:03

to accept his

09:04

below market price

09:06

rather than getting 15 offers from a

09:09

broker in five days and making people

09:11

bid against each other never happens

09:13

yeah right particularly particularly

09:16

after that seller has been receiving

09:18

calls from every broker in

09:21

and listen this is you know i’m i’m

09:23

mostly talking about the 50 plus unit

09:25

world right 50 plus the world is

09:27

sophisticated world every every owner

09:29

knows how the market works and most of

09:31

the time it’s over 20 units it’s once

09:32

you start getting below 20 units below

09:35

50 units

09:36

yes there may be some less sophisticated

09:39

folks maybe it’s a mom and pop maybe

09:41

it’s a 40 year old guy who inherited a

09:44

32 in an asset from his parents who you

09:47

know who passed away recently and

09:49

doesn’t know what he’s talking about and

09:50

some guy calls him at just the right

09:52

moment before a broker called him

09:54

and sells to him for some discount but

09:57

i mean but if you made your life going

09:59

after

10:00

off-market deals and that’s all you went

10:02

after

10:03

i’m telling you that you are one of the

10:06

the slowest worst investors on the

10:08

planet

10:09

because simultaneously i can show you

10:12

dozens and dozens of human beings that

10:14

go after every asset on the market or

10:16

not who are trading at a clip that far

10:19

surpasses anybody who concentrates on

10:21

just off market sure absolutely yeah you

10:25

also touched on right uh uh the defeats

10:28

and seal maintenance right uh the reason

10:30

why a lot of deals are not coming onto

10:33

the market

10:34

uh you mentioned refinancings even the

10:36

acquisitions that were done over the

10:38

last two three four years

10:41

uh particularly the ones that were done

10:44

in the 2018 range when interest rates

10:47

were higher

10:48

a lot of these deals have such a high

10:50

yield maintenance or defeasing scores

10:52

attached to them

10:54

that yes the values have gone up

10:56

tremendously for all of these owners

10:59

but yield maintenance diffusions

11:01

essentially would kill all the the

11:03

profits or the maturity of the profits

11:06

and buyers don’t want to assume a loan

11:09

that is in the in the five percent range

11:12

plus right so yeah

11:14

and sellers don’t want to leave a bunch

11:16

of money on the table i mean they’re

11:18

they’re bringing in plenty of cash flow

11:19

they have plenty of profits why not wait

11:22

another couple of years when the

11:23

defeasance is lowered or gone

11:26

because in any market multifamily is

11:27

going to be sought after right i mean

11:29

unless there’s some you know nuclear

11:31

attack

11:32

i don’t see values going in reverse

11:35

anytime soon all i see is

11:38

i think we’re at a point right now in

11:40

you know call it april slash may of 2021

11:44

where

11:45

uh cap rates truly have compressed so

11:48

close to the borrowing rate that i do

11:51

believe we have reached kind of a

11:53

maximum so i believe by the end of 2021

11:56

we’re going to go from the 10 to 15 per

11:58

year increases in values per unit to a

12:01

more normal right so it’s going to go

12:03

from like this i’m as i’m holding my arm

12:05

up almost straight up to a more normal

12:08

now that’s not that’s not going to

12:10

happen values are not going in reverse

12:12

that’s not happening buyers you that you

12:14

that world’s not going to happen anytime

12:16

soon it’s only going to be a slowing

12:18

of the of the appreciation rate just

12:21

because there is no more no there’s no

12:23

more where to go i mean the northern

12:24

half of florida you know it used to be

12:27

where a 5.0 cap was a phenomenal d i

12:30

mean was was a was a a very high price

12:33

deal right we’re in the four and a half

12:35

cap range yeah right in markets in which

12:37

i’ve never seen before

12:39

now you know you know miami’s the new

12:41

yorks the california’s they’ve been in

12:43

the high threes and low fours you know

12:45

for a long time for a bunch of different

12:47

reasons

12:48

but to have that in the northern half of

12:50

florida has been pretty scarce so now a

12:53

five cap is the new six cap like if you

12:55

can find a five cap good property

12:58

in a good location that has remotely

13:01

value add to it you should jump on it

13:03

yeah yeah so how do you see the

13:06

difference between the a b and c

13:08

uh from uh from a cap rate and price per

13:11

unit

13:13

perspective

13:14

so of course i track all that stuff

13:17

so

13:18

the way i track it is not just abc i

13:20

actually break it down into subcategory

13:22

so i go class a

13:24

b plus

13:25

b

13:26

b minus c plus c

13:29

c minus

13:31

and then i track affordable housing

13:32

separately right

13:34

so in the northern half of florida again

13:36

removing um orlando because orlando

13:40

would throw off all the metrics sure so

13:42

across all the transactions that have

13:44

happened a class is basically a new

13:47

construction deal that’s the only thing

13:49

that can be a class every now and then

13:51

you could get a

13:52

1990s asset

13:55

that could be a class as long as it was

13:59

kept up on the remodel and is in a

14:01

phenomenal location otherwise it’s very

14:03

hard to compete against a new

14:05

construction in order to earn that kind

14:08

of um that kind of standing up so new

14:10

construction class a right now is

14:13

running about 220 to 230 a unit

14:16

right and those rents are between 1500

14:19

and 1600 a month on average

14:22

the class b plus uh b pluses are running

14:26

roughly 180 000 a unit now keep in mind

14:30

when i when i give you an average that

14:32

could mean it could go from 170 to 190

14:34

195 but the overall average when you

14:36

combine all the stats

14:38

is running about 180 000 a unit that’s

14:41

about 13.50 a month on the rents uh a b

14:45

class is currently running about 135 to

14:48

140 000 a unit

14:50

and that’s about 1100 a month rents

14:53

a b minus is 95 to 100 dollars a unit

14:58

that’s a little over nine hundred

14:59

dollars a month rent almost 950 a month

15:02

rent

15:02

a c plus is now 85 000 a unit

15:08

um and those are about 825 a month rents

15:12

a c class is 70 000 a unit

15:16

for about 750 a month rents

15:19

and a c minus is running about 45

15:24

basically under fifty thousand dollars a

15:26

door

15:26

yeah and those are usually under six

15:29

hundred dollar a month rents but you

15:30

know sometimes they can be in the sixes

15:33

um

15:34

but all of these have increased over

15:36

time dramatically i mean it’s it’s been

 

15:39

it’s been pretty incredible

15:41

it’s a it’s only has right uh and

15:44

we see it all across the country

15:46

obviously right uh

15:48

where whatever was trading in 2010 for

15:53

10 15 000 is now exactly in that 90 to

15:57

100 000 range

16:00

so as you uh already mentioned before uh

16:04

that run up that we have seen was just

16:07

absolutely

16:08

extraordinary and

16:10

expecting that it just continues at that

16:13

pace obviously

16:15

it’s not really realistic we may see

16:18

another year or two where it just

16:20

goes in that direction

16:23

but

16:23

at some point we are we are just hitting

16:26

a limit for of how low the cap rates

16:29

ultimately can go right until you

16:32

you get that close to the to the

16:34

borrowing rate where it just uh

16:38

doesn’t make sense anymore right well

16:40

and i you know anton i

16:42

i mean i just hate cap rates all

16:44

together i’ve got so

16:46

you know i’ve done a video on this

16:47

before because cap rates are really only

16:49

they only really mean anything

16:52

on new construction because

16:53

cap rates take into consideration the

16:55

fact that you couldn’t do anything to it

16:57

to improve it right i mean a cap rate is

16:59

only good if the buyer is buying the

17:02

seller’s income that can’t be increased

17:04

you can improve the the vacancies you

17:06

can improve the expenses

17:08

it is what it is and then the cap rate

17:10

means something everything the reason a

17:12

lot of the deals are trading for low

17:14

crap rates isn’t because of the cap

17:15

rates because the cash on cash return

17:18

and the irrs

17:19

can be you know

17:21

the future of those rates

17:23

translate into a low cap rate right so

17:26

if you can buy a true value add property

17:29

not just what a broker calls a value

17:31

but a true value-added property they’re

17:34

looking to achieve a six to eight

17:36

percent cash on cash return within two

17:38

to four years right that could easily

17:41

translate into a four four and a half

17:42

cap if it is a

17:44

you know call it a 1985 property that’s

17:46

300 a month under market or 200 a month

17:48

on the market the guy buying that

17:50

doesn’t give a about or give a crap

17:52

excuse me about the cap rate

17:54

just paying attention to what his return

17:56

is in the future with debt sure yeah

17:58

uh i mean i couldn’t agree more with uh

18:02

with that focus on cap rates is uh is is

18:05

really problematic right also

18:08

uh

18:10

what are the expenses that you’re

18:11

actually using to come up with that cap

18:14

rate right have to be normalized or does

18:16

someone have higher expenses than market

18:19

below market no one really is looking at

18:22

that no one is truly normalizing it

18:25

outside of the institutional space

18:27

obviously in the institutional space

18:29

it’s everyone runs in a very narrow

18:31

range

18:32

with these properties and their cap

18:35

rates

18:36

are are much more applicable but

18:38

particularly once you get into the b and

18:41

then the c space

18:43

as we know expenses are all over the

18:45

board right and unless you kind of

18:48

standardize the expenses for a

18:50

particular property and the size in the

18:52

market

18:54

it’s very hard to say what the true cap

18:57

rate is uh

18:58

it really is

19:00

and i you know i one of one of the

19:02

biggest things i caution investors on us

19:03

and it’s it’s mostly newer to call it

19:06

newer intermediate investors you know

19:08

the first call i get is is hey beau saw

19:11

your so-and-so apartments what’s the cap

19:12

rate i know i’m talking to someone who

19:14

doesn’t do this regularly right it’s

19:16

because it’s it’s not an educated

19:18

question

19:19

um you know the question would be you

19:20

know what you know what are you know

19:22

what can the rents get to you know they

19:24

want to they want to get granular on

19:26

this on the expenses right i mean you

19:28

really have to dive into the expense

19:29

part of things the taxes the insurance

19:31

has gone crazy nowadays

19:33

can you make the repairs and maintenance

19:35

um run one leaner do you already have

19:37

management efficiencies in the area

19:39

there’s there’s so many factors that

19:40

affect

19:41

um you know sort of the return for every

19:43

individual that you know just it’s silly

19:46

to pay attention to cap rates as a

19:47

matter of fact you’re just you’re going

19:48

to lose out on a whole bunch of deals

19:50

because i can tell you that you know i

19:53

could i could name a million buyers over

19:55

the last 20 years i’ve been this

19:56

business that have passed on deals

19:59

that that they want a certain return

20:01

year one which makes no sense

20:04

whereas

20:05

three years from now or four years from

20:07

now

20:08

if i showed them how this property was

20:10

performing from a cash-on-cash

20:13

standpoint

20:14

would they have cared that they were

20:16

quote-unquote overpaying

20:19

four years earlier for that asset and

20:21

the answer is no right but they get so

20:23

scholastic and so sold on that first day

20:27

of of financials and and how they look

20:31

to their investor makeup that they lose

20:33

out on a lot of deals

20:34

yes yeah now i’ve i agree obviously in

20:37

ideal world uh you do not overpay for a

20:41

property right but as long as it’s a

20:43

seller’s market and you compete with

20:45

other buyers well

20:47

it’s your choice either you buy a

20:49

property or you don’t right

20:52

so you touched on

20:54

on taxes uh and on insurance which

20:57

obviously is a hot

20:58

uh topic with with everyone in a lot of

21:02

places

21:03

on the taxi side what have you seen have

21:06

you seen differences from county to

21:08

county in the markets that you’re

21:09

covering how aggressive the sessions

21:12

have become over the last year

21:15

and what you see

21:16

to how it’s going to be this year

21:19

yeah awesome question so on property

21:21

taxes

21:22

here let me tell you what i do because

21:25

as you know in the industry lenders

21:27

investors everybody uses the 80 of

21:30

purchase price rule right

21:32

and so in uh i started in 2016

21:36

trying to quantify that rather than just

21:39

using 80 right because 80 percent can

21:41

sometimes kill a lot of deals for a

21:43

broker when they go to list it and i

21:45

wanted to know if it was actually true

21:47

the answer is yes 80 is still the way to

21:50

go however let me tell you the study

21:52

that i did the report that i did and how

21:53

it varies

21:55

the the way you as an investor listening

21:57

to this podcast the way you should be

21:59

doing it in any market you cover

22:01

is you need to go to the property

22:02

appraiser websites

22:04

the property appraiser websites

22:05

especially in show me states where they

22:07

reveal all the closings florida is one

22:09

of them

22:10

you would go in and so for instance you

22:12

would look at 2019

22:15

sales

22:16

so let’s say you only bought 100 plus

22:18

unit deals conventional whatever it is

22:20

you’d go to the property appraiser

22:22

website you would export every single

22:24

sale that happened to that kind of sale

22:26

into an excel spreadsheet

22:28

and you would list you know the property

22:29

the address what it sold for what it

22:31

sold for per unit

22:33

and then you’d go in and you would take

22:34

the 2020 assessed value

22:37

which would be what that municipality

22:39

now

22:40

deems that property to be worth

22:43

and what you do is you divide the

22:45

purchase price by the assessed value in

22:47

order to come up with a percentage right

22:49

and when you do that in a macro sense

22:51

within markets you can get a pretty good

22:53

indication so what i found was that in

22:55

some markets like for instance in

22:57

tallahassee

22:58

last year it was about 70 on average now

23:02

there were some instances of 80 percent

23:06

and there were some instances of 60

23:09

but the overall average was 70 now

23:12

i understand as an investor in the

23:14

lender if there is even one instance

23:17

in which an 80 happen and 13 others at

23:20

70 investors try to use the 80 so i get

23:24

it

23:26

whereas in jacksonville jacksonville

23:28

right now is running 86

23:30

right

23:31

gainesville was running 80 ocala was

23:33

like 65 percent

23:36

um but i still believe 80

23:39

is a reasonable measure and then if

23:42

you’re in a hyper competitive bid

23:44

the way you can try to win some deals

23:47

is to play the russian roulette and look

23:49

at the stats and see okay there were 16

23:52

closings in jacksonville in this in 2020

23:55

of the type of asset that i buy and 11

23:58

of them were at 70 percent

24:00

two of them were at 80 percent and the

24:02

balance of them or 75 then that’s a way

24:05

because you know your other investors

24:07

are probably not getting that granular

24:09

and you can use a 70 assessment and beat

24:11

that person out on that alone

24:14

and still have a pretty good comfort

24:17

that that’s going to happen

24:18

and if it didn’t to be able to argue

24:20

that with the municipality showing them

24:22

all their closings along with your

24:23

consultant that says hey 13 times of the

24:27

same asset that i just bought you did 70

24:30

how is mine any different and it’s hard

24:32

to answer that

24:33

yeah yeah it’s it’s a great point right

24:36

uh

24:38

going granola in these instances is

24:40

really important uh and

24:43

it’s also from a financing perspective

24:45

right so

24:46

at the high level when we do quick

24:48

quotes we use that 80 percent

24:51

as a standard because we cannot dig in

24:54

deep right but as someone gets into the

24:56

final stages of an offer in the best and

24:59

finals that very often makes a

25:01

difference right

25:03

and as you know right the the expense

25:06

underwriting on the financing side has

25:08

an impact on the noi which has an impact

25:11

on the dscr and the loan proceeds

25:14

right and whether

25:16

a lender’s appraiser is using 80 or 75

25:19

or 85

25:21

will have an impact and

25:23

that’s where we get involved early on

25:26

also with with the buyers to make sure

25:28

that

25:30

we find an appraiser that is comfortable

25:33

with 75 let’s say in a particular market

25:36

right if you

25:37

talk to just one appraiser they may say

25:39

well we do we based on what we have seen

25:41

it say 85 an older appraiser may say i

25:44

think i could support 75 well that makes

25:47

a big difference right

25:50

anton if you let me share a screen i’ll

25:51

just show you a quick spreadsheet for

25:53

the viewers um so

25:55

i’ll do this

25:57

um i’ll just show you like jacksonville

25:59

and i’ll show you a couple other spots

26:01

sure

26:02

let me know when you have that

26:04

it says right now i’m disabled

26:06

yeah okay

26:08

that way the viewers when they see the

26:09

spreadsheet they can see how to set up

26:11

their report

26:12

um okay so yeah yeah here we go i’ll be

26:16

able to do it now yep so as you can see

26:18

this right here this is jacksonville

26:20

right so i’ve got the name of the

26:21

complex these are actual closings in

26:23

2019

26:25

right so these are all the closings

26:28

whether it was a market rate deal or

26:29

student housing deal or affordable

26:31

housing deal the date it closed the year

26:32

it was built this is what it sold for

26:35

this was the assessed value paul i’m not

26:38

sure that we

26:40

i see that you have

26:41

started sharing your screen but it’s

26:44

paused okay hang on a second

26:46

how about now

26:49

uh it still has started

26:51

maybe it’s the wrong

26:53

resume share very weird

27:01

is it the is it the right screen

27:04

yeah i don’t know it’s it’s it said i

27:06

said it asked me to resume share but let

27:08

me try one more time does that work

27:12

yeah it’s still just okay whatever we’ll

27:14

yeah okay so continue on

27:17

anyway i was just going to show you

27:18

graphically if anybody’s watching this

27:20

they want to see what that looks like

27:21

yeah they can reach out to you right and

27:23

they get the statistics there

27:26

no problem yeah

27:28

yeah okay very good on the insurance

27:31

side obviously florida is

27:34

based in texas right we have a lot of

27:36

natural disasters on an ongoing basis

27:39

tax insurance rates have gone up like

27:42

crazy florida is another one of those

27:45

markets

27:46

as we know so what what have you seen uh

27:50

uh

27:50

where

27:51

uh where the insurance cost has gone up

27:54

and have you seen differences between

27:57

uh along the coastal areas like

27:59

jacksonville versus when you go a little

28:02

bit further inland or does that not

28:03

really make sense not as much i mean

28:05

it’s it’s now you know the on the low

28:08

end seven hundred dollars a unit a year

28:11

up to

28:12

about eleven hundred dollars a unit a

28:13

year depending on the size of the asset

28:16

and literally like two years ago

28:18

maybe three at the most but probably

28:20

just two years ago it was half that yeah

28:22

yeah i mean i mean an insurance deal to

28:25

be 350 400 a unit that was that was

28:27

where it was and now it’s more than

28:29

double

28:30

i mean it’s become something it’s it’s

28:32

quite significant and and a lot of its

28:34

liability a lot of is the assault clause

28:37

i’ve you know i’ve talked to some

28:38

insurance guys about it before but it’s

28:40

pretty crazy and it’s it’s actually

28:42

closer to the thousand dollars the

28:44

smaller the asset yeah yeah and if you

28:47

do not have uh any type of uh umbrella

28:50

all rights umbrella right so yeah so

28:53

that’s another another tip you know as

28:55

you accumulate more units if you can put

28:57

them under a bigger umbrella

28:59

you know those guys are able to get

29:01

things back down to you know call it

29:03

2018 levels

29:06

um by by lumping them all with one

29:08

carrier and all under one umbrella that

29:10

helps a lot now when you go to sell that

29:12

asset later you have to imagine that the

29:14

next buyer won’t have your have your

29:16

abilities and your power and your size

29:18

but at least during the hold it can

29:20

boost your turns

29:22

yeah yeah

29:23

in your market you also see that some

29:26

property management companies offer

29:29

offer their own umbrella insurance for

29:32

uh for property owners

29:34

yeah

29:35

at minimum they have connections with

29:37

those who they have their own portfolio

29:39

and their management portfolio under so

29:40

it’s definitely worth checking but it

29:42

depends on the market right the larger

29:44

the market the bigger the property

29:45

management players are

29:47

whereas the secondary and tertiary

29:49

markets

29:50

they could still have great managers for

29:52

that market but they don’t have the

29:53

power of the of sort of the reach if you

29:55

will right yes definitely yeah it’s a

29:59

very good point now here again right so

30:02

if you’re a buyer right so you look at

30:05

at insurance rates taxes we already

30:07

discussed but whatever the current owner

30:09

has in insurance cost

30:12

doesn’t really matter right

30:15

you need to talk to your insurance

30:17

broker early on to get a sense of what

30:19

what that property

30:21

will

30:22

will cost because that’s also for a

30:25

lender will use the current the new rate

30:28

that you have to pay as a buyer no one

30:31

cares what the current owner is paying

30:33

yeah the good thing is this is the one

30:36

section in which everyone’s kind of on

30:38

the same playing field other than the

30:40

giant organizations that can put under

30:42

an umbrella

30:43

it ain’t like their

30:45

underground insurance company that is

30:47

able to do some incredible you know um

30:51

you know offer and beat you out

30:54

sure yes one of the same folks for the

30:56

most part

30:57

yeah absolutely yeah

31:00

now

 

31:02

switching gears a little bit uh

31:04

i think you have a

31:06

unique model right when we look at your

31:08

marketing

31:10

uh obviously or if you’re a

31:14

multi-family broker in in northern

31:16

florida in the markets you already have

31:18

mentioned i think what is unique of what

31:21

you’re offering is

31:23

that you

31:24

not just saying look we are listing your

31:26

property but you have access to

31:28

essentially the whole broker community

31:30

through brokerage now

31:33

in reality having been in that business

31:35

for a long time

31:37

while co-brokering is a common thing in

31:39

on the residential side virtually

31:41

everyone does it

31:43

uh in the commercial space it’s it’s uh

31:46

it’s unusual

31:48

and uh so so maybe you can tell our

31:50

listeners a little bit how you are able

31:53

to achieve

31:54

like all brokering with with the large

31:57

firms that may

31:58

may not be that willing to cope with you

32:02

yeah so i mean the the co-brokering

32:05

becomes sort of non-existent in the

32:08

commercial investment sales world right

32:11

so like retail leasing office leasing

32:14

industrial

32:16

um you know small office building sales

32:19

anything that’s non-income producing in

32:22

the commercial real estate world

32:23

co-brokering is still very prevalent

32:26

that exists that’s a real thing you want

32:28

every broker to be a part of it and help

32:29

you fill those specific spaces yeah the

32:32

reason that commercial investment sales

32:35

is is largely an un non-co-broking world

32:38

is because

32:39

everybody wants that asset

32:42

versus like if you’re selling a 10 000

32:44

square foot office building

32:46

it’s a needle in the haystack trying to

32:47

find the right buyer who wants that

32:50

building to move their business into and

32:52

so as a listing broker you want to open

32:54

your world up to every broker

32:57

in the investment sales world no broker

32:59

on the planet is worrying whether or not

33:02

he’s going to sell that apartment

33:03

complex it’s sale

33:05

right

33:06

in fact our whole our whole job is to

33:08

choose the right buyer among dozens and

33:11

dozens of across the world

33:13

so the re the reason most um brokers

33:17

don’t go broke in the multi-family world

33:19

and this is primarily in

33:21

most of the nationals right because

33:22

mostly the national companies the marcus

33:25

and miller chapter dallas colliers

33:26

cushman wakefield

33:28

it’s not because they’re being nasty or

33:30

they’re not being you know they’re not

33:32

being a sharing company it’s because

33:34

they don’t have to right most

33:36

multi-family brokers have developed a

33:38

tremendous database it’s a very small

33:41

world

33:42

that that buys these assets okay there’s

33:44

literally only 993 owners in the world

33:47

that own every asset over 10 units in

33:49

the northern half of florida yeah it

33:51

means there’s only about 2 000 and own

33:53

every single one actually there’s less

33:54

than 1500 on every single one i’m in the

33:56

state of florida

33:57

small world they’re all the database if

33:59

you’re worth a crap whatsoever as a

34:01

broker and so really the touch of a

34:03

button i’m already able to put my

34:06

listing

34:07

in front of everyone in the world that

34:08

could ever buy it

34:10

now um so so that’s that’s why

34:12

co-broking is not necessary and so if

34:15

you are a broker who’s representing a

34:17

buyer and you bring it to that broker

34:20

you need to be paid by the buyer because

34:23

most likely that that broker doesn’t

34:25

need your buyer he’s already got 15 or

34:28

50 that wants to buy it

34:30

the reason i’m able and the reason also

34:32

the other reason most brokers aren’t

34:33

able to cobra because you have to

34:34

understand how they’re made up right

34:37

so most brokerages they have

34:40

either either a franchise fee

34:43

and or a corporate fee

34:45

desk fees

34:47

most really good brokers are partners

34:49

right because it’s hard to do it all

34:50

yourself so you have a it’s you and some

34:52

other guy who are killers in your field

34:55

and you’ll usually have anywhere between

34:56

two and five staff members you have lots

34:59

of salaries

35:00

you have all the costs and so i have

35:02

calculated that most national brokerages

35:06

that have a two partner format

35:08

keep between 20 and 35 percent

35:11

individually after all costs

35:14

paid a hundred thousand dollar

35:15

commission they’re making 30 grand the

35:17

actual guy that you worked with right

35:19

and there would be two partners and each

35:20

of them get 30 grand but after

35:22

everyone’s paid and the corporations

35:23

paid everything paid

35:25

for me i own my company i don’t have

35:27

partners i don’t have franchise fees i

35:28

don’t have companies i have one staff

35:31

member and then i sub everything else to

35:33

house to us other companies right so i

35:36

have lots of outside companies that i

35:38

sort of pay per rata to not salaries

35:41

so i keep every i i think my expense

35:44

structure is roughly eight to ten

35:46

percent yeah total with salaries

35:48

included

35:49

so because of that i can offer to my

35:52

customer when you hire me

35:54

you get beau berry you get cb richard

35:57

ellis you get colliers you get cushman

35:59

wakefield you get ara you get all the

36:02

big boys

36:03

and and yes you know most of the buyers

36:05

who they would talk to will have already

36:07

received my my asset

36:10

but i’m happy to co-broke with any of

36:11

these guys it makes my job easier if

36:14

they’ve got a tighter relationship with

36:16

some other buyer happy to it right

36:19

my job is to bring my seller the biggest

36:21

price possible and if i can expose it to

36:23

as many people who a human being is

36:25

possible great

36:26

yeah okay that’s a that’s a good point

36:29

right uh

36:31

obviously you’ve you’re in in that niche

36:33

so you can offer it to the big boys

36:35

right yeah

36:37

and how how has the reception been with

36:39

uh with a child ll or cbre cushman with

36:43

uh you know frankly because you know

36:46

because they have so many of their own

36:48

assets they’re working on yeah

36:50

multi-family brokers don’t typically

36:53

do buyer representation right yeah it’s

36:57

a needle in the haystack business you

36:59

know even if you have the best buyer on

37:01

the planet you’re still going to compete

37:03

against that seller’s 15 or 20 other

37:06

offers absolutely

37:08

hook up with a buyer and go around and

37:11

submit offers to sellers or sell listing

37:13

brokers is a waste of my time because i

37:16

can go out and find my own listings that

37:19

i know are going to sell sure so you

37:21

know

37:22

it’s very rare even though i offer a

37:25

cobra to anyone and everyone that i

37:27

actually end up doing a deal with

37:29

another broker because they either get

37:32

beat out by other buyers that i have

37:34

coming at me or they don’t give it the

37:36

time and i get that i mean i you know i

37:39

i get it

37:40

yeah yeah okay but at least you’re

37:43

offering it right so it still broadens

37:45

the

37:46

reach right if you if they happen to

37:48

have someone you don’t know right so at

37:50

least uh

37:52

uh

37:52

it’s it’s nice to have a partner it’s

37:54

almost like you know i don’t ever i

37:56

don’t ever look at it as adversarial

37:58

it’s not like

37:59

you

38:00

and we you know brokers become a

38:01

partnership we both want the same thing

38:04

we both want to close this deal and i

38:06

love when a broker has a tighter or

38:08

better relationship with that buyer

38:10

because you know if something comes up

38:12

in a transaction

38:13

they can do the arm twisting or the arm

38:16

holding if needed not me yeah yeah very

38:19

good point yeah

38:21

very good so uh looking forward for the

38:25

rest of uh of this year where where do

38:27

you think uh north and florida is going

38:31

yeah i think the number of transactions

38:33

is going to significantly increase from

38:36

the first quarter

38:38

i think pricing is i think probably

38:42

august september

38:44

is going to kind of top off where you’re

38:46

not going to see any more like

38:47

huge spikes

38:49

um

38:50

and and it really depends a lot of this

38:52

depends on what happens with the biden

38:54

tax plan that’s now being pushed around

38:56

right

38:57

you know most investors i’ve talked to

39:00

do not believe the full 44.3 capital

39:03

gains tax will get approved

39:06

i do believe something in between will

39:08

i’ve heard 28 passed around right but

39:11

whatever happens if an actual increase

39:14

actually happens

39:16

what has happened historically

39:18

when that happens what happens so for

39:20

instance let’s say let’s say uh

39:23

september

39:24

biden announces you know there’s a

39:26

pretty good pretty good chance this is

39:27

going to happen i have a bunch of people

39:28

on board we’re going to get this passed

39:31

then the fourth quarter 2021

39:34

brokers are going to sell a crapload of

39:36

real estate

39:37

right and then what will happen is in

39:39

2022

39:41

the number of sales will slow way down

39:44

because people are thinking oh god i’m

39:46

paying eight percent more 10 more 20

39:49

more whatever it is

39:50

and then by 2023

39:53

transacting comes back maybe not the

39:55

full normal but it’s on the way back to

39:58

normal because what happens is what i

40:00

call the covet effect right so when

40:02

kovitt happened in march of 2020 the

40:04

world stopped

40:06

everyone was scared to death nothing

40:07

happened nobody transacted and then

40:10

everyone kind of says

40:12

this is the new world this is the way

40:14

things happen and we got to get back to

40:16

life and and then transacting came back

40:18

to normal for the most part and that’s

40:20

what happens with taxes it feels like

40:23

the end of the world and it sucks

40:25

and there will be a year of turmoil

40:28

where you know number transactions will

40:30

will actually all be done by a small

40:33

number of us brokers right because what

40:34

happens is in a tough tax year people

40:37

use the best brokers not their cousin

40:40

from church who occasionally sells

40:41

apartment complexes right

40:43

but usually things get back to normal

40:46

the the year after that plan comes back

40:48

in

40:50

yeah it’s a it’s a good point uh it you

40:53

really get everyone feels that that’s

40:55

the new normal right and

40:57

you uh you have to you have to live with

41:00

it

41:00

at the same time right

41:03

as an investor whatever investment you

41:05

do that has

41:07

the capital gains attached to them it’s

41:09

not just

41:10

uh limited to real estate it’s it’s

41:12

stocks too and then right

41:15

right so everyone gets hit there right

41:17

so

41:18

that’s that that’s just uh uh just if

41:20

you’re in real estate you have to get

41:22

back to real estate and that’s what

41:23

happens is i mean you have i mean you

41:25

know all the people you and i work with

41:26

on a regular basis anton are in real

41:28

estate in some way and ain’t like

41:30

they’re gonna stop their life because of

41:32

that they’re going to figure out ways to

41:34

transact again and that’s what’s always

41:36

happened throughout the history of the

41:37

world

41:38

yes absolutely and uh so obviously there

41:41

will be some new strategies right

41:44

whatever it might be right so obviously

41:47

bonus depreciation

41:48

is already being faced maybe there are

41:50

some changes to the depreciation

41:53

benefits too

41:55

uh but even if they are not maybe there

41:57

is less

41:59

less aggressive depreciation initially

42:01

so that you do not have to have a

42:03

capital gains tax with the recapture at

42:05

the end so

42:07

who knows right uh everyone will have

42:09

different ways of of uh of uh running

42:13

their strategies

42:19

there

42:20

i’m here yeah now i can hear you i don’t

42:22

know i just kind of went

42:23

oh okay

42:24

i can hear you now

42:26

okay very good

42:28

all right

42:29

very good uh beau it was a great

42:31

conversation thanks for sharing uh all

42:33

your knowledge right uh particularly in

42:36

the you have that niche uh in northern

42:39

florida and i would say there are a lot

42:41

of obviously florida

42:43

owners and buyers in that market but

42:45

there is only a lot of interest from

42:47

across the the country

42:49

uh

42:50

uh in in that market

42:53

yeah for for some time now and i think

42:55

it it’s only will will continue because

42:57

florida as a whole is a is an attractive

43:00

state to be to be invested in

43:03

it’s obviously from a apart from

43:06

uh from from the insurance side taxes we

43:08

have an issue everywhere

43:11

but it’s a landlord-friendly uh state so

43:14

that makes it makes its only uh

43:16

attractive

43:18

so how can

43:21

our listeners uh reach you and i think

43:24

you also have a book that you have

43:25

written so maybe you can also mention

43:27

that on in addition to your contact

43:30

details sure

43:32

three ways to reach me number one i did

43:33

write this book that’s um that’s it’s

43:36

done very well it’s called multi-family

43:37

investors who dominate

43:39

it’s on amazon and hardcover it’s on

43:41

audible it’s on kindle but the book is

43:43

all about how to get flooded with

43:45

listings

43:46

from brokers and sellers

43:48

first before anybody else sees them

43:50

right so it’s got step-by-step processes

43:53

the other way to reach me is i have a

43:54

website called beaubeery.com

43:56

b-e-a-u-b-e-e-r-y.com

44:00

now the reason you want to go there no

44:01

matter what market you’re in i don’t

44:03

care if you’re in the texas market new

44:04

jersey florida whatever it is

44:07

at the top of the website is a section

44:09

called resources and when you click on

44:11

resources all the markets like cover

44:13

drop down

44:14

for your market you want to master every

44:17

metric and every number and every button

44:19

i have in each of the markets i covered

44:21

because the more you can master

44:23

the metrics that i have on those sites

44:26

the faster you can react to

44:27

opportunities in your markets

44:29

and the third way to communicate with me

44:31

um is my youtube channel so i have a

44:34

youtube channel called beau knows

44:35

multifamily b-e-a-u beau knows

44:38

multi-family

44:39

and on that channel i talk about how to

44:41

buy more assets how to sell them for top

44:43

dollar and how to do market analytics um

44:47

very very good so that you can react to

44:49

opportunities yeah excellent uh i would

44:52

say uh when you uh when our listeners

44:55

look at your website and all the

44:58

uh the statistics that they find broken

45:01

down by markets that you’re covering

45:04

uh i would say it’s it’s hard to beat i

45:07

have not seen it with

45:08

with

45:10

any broker anywhere whether they’re

45:11

large or small in in that market or in

45:14

any other market

45:17

so

45:18

just an information alone is only

45:20

very viable obviously for someone who is

45:24

actively looking in your market right

45:26

but as you have said it’s invaluable

45:29

information if you’re not looking in

45:30

that market just to see what you’re

45:32

tracking and give an idea what the

45:35

prospective buyer or an existing owner

45:38

may want to track in their home market

45:40

where they have properties or targeting

45:42

properties because that’s very valuable

45:45

uh way of of knowing what is really

45:48

happening in

45:50

in in your own market that that you are

45:53

interested in or on property and

45:55

yeah i agree yeah yeah

45:58

well thank you for having me i do

45:59

appreciate this anton yeah thanks sir beau

46:02

it was really great uh having you on and

46:05

you’re sharing all your wealth of

46:06

knowledge and uh i wish you all the best

46:09

for the rest of 2020