In my other life, I organize a co-investing club that meets every month to vet passive real estate investments together. We’ve invested in dozens of real estate niches over the last few years, some of them enormously profitable.
Here are a few personal favorites, where I plan to put more money over the next year.
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Multifamily properties are valued based on their net operating income (NOI). So, the trick to adding value is raising the NOI.
Many operators do this through renovating units and raising rents. But a more creative approach involves partnering with the local municipality to set aside some or all of the units for affordable housing, in exchange for a property tax abatement.
Done right, the operator sees almost no drop in rental income, but dramatically cuts their tax bill. The end result: instant higher cash flow and property values, without the construction risk that comes with renovations.
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Mobile home parks comprise the only shrinking asset class in the U.S. Local housing boards don’t like them, even as they decry the shortage of affordable housing out of the other side of their mouths.
“Mobile home communities are one of the most recession-resistant real estate assets, and the supply is shrinking every year,” noted Oren Sofrin, real estate investor with Eagle Cash Buyers. “Unlike traditional multifamily, the investor often owns the land but not the homes, meaning fewer maintenance costs and more predictable income.”
Lot renters almost never default on their rent either, even in recessions. It costs more than 10 times as much to move a mobile home than the typical monthly lot rent.
Investors can flip raw land for cash, or sell on installment contracts. They can hold and lease the land, or develop it themselves, or install a manufactured home on it and sell to a first-time homebuyer.
Over the last year, our co-investing club has vetted and invested with three different land investors, all of whom have delivered strong returns.
The “industrial” umbrella covers many subclasses of real estate, from warehouses to storage to manufacturing to breweries.
Tie Lasater of Lasater Capital likes smaller, strategically located industrial spaces for e-commerce warehousing. “Flex warehouses in Tier-2 cities offer long-term leases, minimal management and strong tenant retention,” Lasater said.