When it comes to stable tenants and predictable cash flow, it’s hard to find a better asset class then Medical Office. As the population ages and people live longer, the demand for medical care will continue to flourish. Plus, technology will never replace the human body. Another commercial real estate class with predictable cash flow is Multifamily. Multifamily is attractive because of looming loan maturities and resulting distress.  Ben Reinberg, CEO of Alliance Consolidated Group of Companies, has specialized in Medical Office for the last twenty years and is now capitalizing on Multifamily to leverage current buying opportunities to acquire great properties for less than replacement costs. 

Although Multifamily is facing challenges in sunbelt markets, and loan maturities are piling up, long-term fundamentals remain strong. Rents are holding, occupancy levels are in the low 90’s%, and collections are solid. There have been concessions because of excess supply, but even these are gradually starting to contract. Joe Fairless, Co-founder and General Partner of Ashcroft Capital, owns over 14,000 units in sunbelt markets. Joe is prioritizing Net Operating Income of his current portfolio and is selectively looking to acquire additional A to B+ properties with a large discount to replacement cost. 

As investors seek alternatives to the stock market, as ETFs make it harder to outpace the market, as awareness for private investments increases, allocations are increasing to non-traditional assets. Over the past decade, and even more so recently, investors have invested more money into privately held Real Estate, Private Credit, and Private Equity. With the right investment strategies, these vehicles offer predictable cash flow with conservative risk. Brad Johnson, Founder and Managing Partner of Evergreen Capital, helps clients preserve and grow capital by investing in proven, cash-flowing alternative investments.

As investors have become frustrated over the complexity, the legacy issues, and opacity of funds, many have gravitated to investing in single asset deals. Single assets are easier to underwrite, require less due diligence, and great deals are starting to emerge with distress in the market. Mike Zlotnik, CEO of TF Management Group, is offering investors opportunities to invest in single asset deals in Industrial, Outdoor Retail, and select Multifamily. Mike also manages conservative debt funds that he’s run for several years.

Although there’s been resistance to investing in office since the pandemic, back-to-office trends are prevailing as more employers are requiring employees to come back in-person at least three days per week. Along with this trend and no new supply, quality office space is seeing resurgent demand, especially higher quality space in great locations. Investors are now seeing opportunities to acquire these properties for as little as 10% of previous sale prices with strong in-place cash flow and high upside. Nate Melchior, Principal at Dunton Commercial, is actively pursuing office acquisitions in the Denver market. Dunton Commercial currently owns and manages retail and office properties in Colorado.

One of the highest in-demand asset classes is Small Bay Industrial. In the last several years, most of the new industrial construction has been large warehouses to address the growth of e-commerce. Small Bay, on the other hand, has seen very little new construction since 2008/09. Municipalities generally favor new housing. As a result, there’s limited inventory available for tenants, and therefor high occupancy rates across these properties. David Hansel, Founder and Managing Partner at Lucern Capital Partners, started out in multifamily, but now specializes in Small Bay Industrial because of the great attributes of this asset class.

After a forty-year honeymoon of plummeting interest rates, it’s going to require a lot more operational skill moving forward to generate positive returns in commercial real estate. Although we’re going to see increased distress over the next several quarters, operational expertise will still be required to achieve desired returns. This is especially true in multifamily because of the daily demands of the asset class. Mark Hamilton, founder of Hamilton Zanze, manages over 25,000 residential units, making him one of the top fifty multifamily operators in the country. Mark has achieved both income and growth over the past several decades for his investors while utilizing fixed rate debt and conservate underwriting.

In the world of private investing, there is a growing plethora of opportunities to generate cash flow. There’s Real Estate equity in single assets or funds, there’s debt funds that provide conservative and consistent cash flow, and there are many opportunities outside of Real Estate. Matt Owens, Founder of Owens Capital Group, has a successful single family debt fund that has generated 8% for years. He has more recently created a fund of Short-term Rentals, and partnerships with an Accounts Receivable agency, a Litigation Finance firm, and a cannabis operator in Maine. Matt helps passive investors maximize the returns they get across several different asset classes while minimizing risk.

The biggest asset class in the world is the U.S. single family housing market. That’s why the health of this asset class has such a large impact on the broader U.S. economy. Over time, single family homes have been one of the most predictable, conservative investments available. In most ten-year periods, home values have almost always gone up in value. Rich Fettke, Co-founder at Real Wealth.com and Author of The Wise Investor, has helped thousands of investors buy single family homes plus 1-4 unit apartments in growing markets all over the country. He finds affordable and growing markets and identifies property management companies to manage your investment. 

Buying sub-institutional size deals entails less competition, and therefore lower prices. In the $3 - $10 million dollar range, competition is mostly local to a specific market with a buyer pool that generally doesn’t include national or regional players. David Hrizak, CEO of The Streamline Companies, buys, builds and manages across various asset classes in Phoenix, the 5th largest market in the country. Over the past three years, David has focused on Class B office and Medical Office. Class B office has been a great category because most tenants can’t afford Class A and don’t require extravagant amenities. Medical Office is a sweet spot that correlates to the aging of our population and the growth of Health Care.

Finding an avenue to high returns can be difficult in saturated markets. Certain markets outside of major metros, however, can provide a unique opportunity for great returns as major metros have become exorbitant for large swaths of owners and renters. Colby Swarz, Vice President of Capital Markets & Investment Strategy of Burkentine Real Estate, builds Planned Urban Development communities with garden style apartments and townhomes that appeal to residents who are looking for a higher quality of life with more space at a lower cost.

Although retail has been out of favor over the past several years with the threat of ecommerce, it’s gained traction more recently. As opposed to being venues for traditional soft goods stores, retail space is becoming utilized for other purposes such as medical services, boutique gyms, and restaurants. There’s also been negligible new construction since 2008, so demand for space has outgrown supply, which has resulted in mid-90% occupancy rates nationally.  Alex Smith, Co-founder and Managing Partner of  Regal Ventures, acquires retail, mixed use, and small bay industrial mostly in New York and the greater Tri-State area.

It’s always difficult finding a deal, even in down markets, but if you’re willing to be contrarian, there may be lucrative opportunities that present themselves. One example is vintage 100+ year old multifamily properties in downtown Portland, Oregon. These properties are trading at 300-400 basis points higher than suburban value-add properties that hardly cash flow, and appeal to a large subset of urban renters. Paul Del Vecchio, CEO and Founder of Ethos Companies, is investing in these high-yielding properties. Ethos has developed, manages, and invests in several thousand multifamily units. They also own and manage industrial, retail and office buildings.

Sometimes the best ideas are the simplest and seem the most obvious in hindsight. Co-warehousing is one of these ideas. Co-warehousing was created for small, often start-up businesses to rent smaller spaces for shorter periods of time. These spaces are typically sub-1000 s/ft, as small as 250 s/ft, which are desirable to entrepreneurs who can be moving out of a home office or storage space, or just starting out. Co-warehousing also offers these tenants shared amenities. Jeff Jenkins, Vice President of Acquisitions for WareSpace, was the second employee back in 2021 and is responsible for expanding the company’s footprint nationwide.

One strategy to get big discounts on multifamily properties is to buy the loans from current lenders at below par. Once a mortgage becomes 60-90 days late, lenders will consider selling the note to de-risk their position and redeploy the capital into other loans. Buying pools of these notes is a strategy deployed by larger funds but can also be used by smaller investors to acquire buildings in smaller to midsize markets for short or long-term holds. Chris Zona, litigation attorney, helps clients navigate this sometimes-complex process in order to expand their portfolios for short-term gain or longer-term appreciation.

The single-family housing asset class is the largest in the U.S, valued at $70 billion. In the past few years, however, this asset class has seen some of the same challenges of other commercial real estate classes, such as overleverage, increased interest rates and escalating expenses. As a result, attractive opportunities are starting to emerge that translate into solid investments that can generate a 7% yield. Noel Christopher, Managing Director of Strategy & Growth at Genstone Financial and Property Services, leads the strategic vision and execution for Genstone’s national single-family rental property management business and associated services, including real estate brokerage, construction, insurance, lending, and title offerings. Noel also owns his own portfolio of 50 single family rentals.

Although prices on multifamily have come down, the market still hasn’t stabilized. Rents have come down in many markets and expenses have increased, but prices have still not adjusted accordingly. Additionally, cap rates are still often lower than interest rates. Brian Burke, President and CEO of Praxis Capital, a multi-decade multifamily investor, has transitioned from multifamily to investing in senior living facilities. Brian is buying distressed senior living facilities and renting them out to professional operators on a NNN basis. The tenants are responsible for all expenses and sign 15-year leases with built-in rent increases. Brian is buying these facilities at huge discounts to replacement cost with high cash-on-cash returns. 

As major metros have become too expensive, investors are moving to tertiary markets in order to improve yield, thereby driving up prices in these markets. Smaller markets can be attractive because prices can be 50% less and rents not that much lower. Southern New Hampshire is a great example, as buyers from Boston and other markets are entering this market and paying record prices. Axel Ragnarsson, founder of Aligned Real Estate Partners, buys 10–50-unit value-add apartment buildings in Southern New Hampshire directly from sellers. Southern New Hampshire is a supply constrained, stable market with population and rent growth as residents are moving there from more expensive markets in the Northeast.

In today’s market, investors are finding it difficult to achieve strong, reliable returns. That’s why more investors are acting as the bank, making loans directly to other investors who don’t qualify for shorter-term bank loans despite having excellent borrower qualifications. These loans are shorter-term, real estate-backed loans that often generate low double-digit returns. Fred SaintAmour, Owner and Managing Partner of Boathouse Commercial Funding Group, has closed over 200 hard money loans with no losses. Fred does one-off deals versus a fund that puts pressure on him to deploy investor capital and risk compromising his lending standards.

As a passive investor, one way to reduce risk and also participate in the upside usually reserved for General Partners, is to invest in a GP fund. By investing in a GP fund, you get to participate in the fee income generated by the fund while also sharing in the upside economics of the individual deals. Instead of achieving mid-teen returns, you can potentially do considerably better, even as high as mid 20’s. John Azar, Founder, CEO, and Fund Manager of Peak 15 Capital, is a Private Equity expert and capital allocator who provides investors access to these attractive economics through his multi-asset class alpha fund.