Multifamily Market Overview with Beau Beery

00:00

franchise with partners

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i exclusively did multifamily only since

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2010

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i sold that firm back to my partners in

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2020 and just went solo into

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multi-family advisors with myself and my

00:13

staff members

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we cover the northern half of florida

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from orlando and winterhaven and

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lakeland

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all the way up to tallahassee

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jacksonville daytona

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gainesville ocala all those markets

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i do anything over 10 units conventional

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or student housing

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and occasionally i’ll do development

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sites

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very good

00:37

uh so

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when we talk about the markets obviously

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it’s all of uh northern and central

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florida

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except the tempo area and i think

00:49

orlando you’re covering too but

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maybe you can tell us a little bit the

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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

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against all kinds of other assets right

03:58

but what happened in january and half of

04:00

february was nothing came on

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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

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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

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there now we’re not going to be at 2018

05:06

and 2019 levels in terms of number of

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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

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inventory trade

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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

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and therefore that’s why prices have

06:22

gone up is because

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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

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so there’s there’s no way around at

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anton you’re going to have to you know

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there’s always going to be multiple bids

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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

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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

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what off market means to a lot of people

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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

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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

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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

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to sell to one human being to have to

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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

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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

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calls from every broker in

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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