Investing in the financial markets is stressful, especially in a crisis. And even if you happen to be brilliant at options trading, $100K in the equity market will still only buy $100K in assets. On the other hand, investing $100K in multifamily will buy you a $500K asset—and earn you five times the return. Not to mention the fact that it’s essentially recession-proof!
Bruce Fraser is the Managing Partner at Elkhorn Capital Partners, a private equity firm that focuses on multifamily residential real estate in economically insulated submarkets. Prior to Elkhorn, Bruce ran a lucrative hedge fund, successfully navigating the financial crisis before his research led him to multifamily. In a few short years, Bruce has built a portfolio of 1,600 units, and he currently serves as a member of the Forbes Real Estate Council.
On this episode of Apartment Building Investing, Bruce joins me to explain what makes multifamily a better investment than the financial markets, especially through the COVID-19 crisis. He tells us about his first multifamily deal (as one of my early coaching students!), discussing the challenges he faced early on and describing how the Law of the First Deal impacted his real estate career. Listen in for Bruce’s insight on the advantage of choosing a niche in distressed assets and learn his aggressive but realistic approach to scaling a multifamily business.
Bruce Fraser – Key Takeaways
What makes multifamily a better investment than the financial markets
- S&P 500 = 2.5% average annual return over last 20 years
- Multiplier effect ($100K buys $500K asset, earn $100K vs. $20K)
Bruce’s first multifamily deal as one of my early coaching students
- 134-unit property in Fort Worth
- $5.7M acquisition (raise $2.1M)
- Sold 14 months later for $7.9M
Bruce’s experience with the Law of the First Deal
- Second deal under contract when first closed
- Acquire 3 to 4 per year ever since
Why Bruce chose a niche in distressed situations
- More control over occupancy growth than rent growth
- Create much more substantive equity in short period
Why Bruce sought out coaching early on
- Overcome uncertainty
- Understand deal structure
Bruce’s approach to scaling a multifamily business
- Manage time wisely (leverage third-party property manager)
- Be aggressive but realistic
Bruce’s experience through the COVID crisis
- Investors ready to buy and deals available
- Biggest challenge = lending environment
Bruce’s goals over the next three years
- Double portfolio to 2K to 3K units
- Centralized position in handful of markets
Why multifamily is the best investment through the pandemic
- Tax efficient distributions
- Demand for apartments remains high
- Protects against inflation
Connect with Bruce Fraser
Email [email protected]
Resources
Goldman Sachs Economic Outlooks
Purchase the Replay of Deal Maker Live
Join the Nighthawk Equity Investor Club
