The recent foreclosure on 3,200 units in Houston has investors nervous about putting their money in multifamily.
But does that default mean we should all be sitting on the sidelines?
John Casmon argues that investing in apartments is a business, just like any other. And if we avoid the red flags in the Houston deal, we can (and should) continue business as usual.
John is Head of Acquisitions and Investor Relations at Casmon Capital Group, a multifamily investing firm committed to helping busy professionals achieve financial freedom.
John has invested in over $100 million worth of apartments, and he is passionate about consulting with active multifamily investors to help them start or grow their business.
On this episode of Financial Freedom with Real Estate Investing, John joins us to discuss what mistakes the Houston operators made and how to protect yourself from a similar fate.
John explains how he got started with 2- to 4-unit multifamily properties and shares the breakthrough that gave him the confidence to raise money for bigger deals.
Listen in for John’s insight on overcoming low market sentiment and learn why you should still be analyzing deals and looking for opportunities in apartments right now!
How John got into apartment investing
- 15 years in corporate marketing and advertising
- Peers lost jobs in recession, real estate became Plan B
Why John started with multifamily vs. SFH rentals
- Experienced investors wished they’d done apartments sooner
- Began with 2- to 4-unit properties to build confidence
How John got serious about working with other investors
- Ran out of own money again after buying 8-unit property
- Saw friend go from 3 to 9 to 90 units through partnering
John’s breakthrough around raising money from LPs
- Thought asking for money went against being self-made
- Realized he was offering service, opportunity to make money
John’s approach to speaking with potential investors
- Listen to understand their financial challenges and goals
- Ask why they’re interested, what they want out of investing
How John transitioned from Chicago to other real estate markets
- Started podcast, asked about best places to invest
- Built criteria around job growth, ease of doing business, etc.
John’s insight on the 3,200-unit foreclosure in Houston
- High leverage deal with floating interest rate (no cap)
- Property needed work but couldn’t implement business plan
What lessons we can learn from the Houston foreclosure
- Focus on preserving capital and figuring out ways to grow it
- Invest in cash flowing assets that appreciate over time
How John is protecting himself in the current economy
- Pay attention to rent growth projections, pivot as needed
- Hold more capital in operational reserves
- Focus on long game, reposition short-term deals for flexibility
John’s take on the limitations of fixed long-term debt
- Get stuck sitting on equity in heavy value-add deals
- Consider bridge debt + more reserves, higher capex budget
Why John is still looking for deals right now
- Investors still need to park capital in cash flowing assets
- Get real-time feedback on where market is headed
How John is overcoming low market sentiment
- Used to getting in and out in 24 months with 3X returns
- Remind that 5- to 7-year holds with 2X multiple is ‘normal’
What’s behind the increase in dealflow John sees in the Midwest
- $88B in apartment loans coming due in next 24 months
- Owners that held on during COVID ready to retire
Connect with John Casmon
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