For many decades, the notion of the American Dream was tied directly to being able to buy a home. Property values are soaring, making this as attractive a notion as ever. Yet, as the constant demands for more affordable housing reflects, there simply are not enough homes being built to match demand. Drawn by the prospect of a guaranteed accession to economic security, many Americans see the value of putting their money into real estate, but they are simply priced out. Others, more interested in real estate solely as an investment vehicle, are put off by the hassle of ownership, from maintenance to finding tenants.
Yet, it is actually possible to get in on the real estate game without dealing with acquisitions or the management of the property. One way is to invest in a publicly traded Real Estate Investment Trust (REIT), but these can be volatile and tend to sway more heavily with overall market conditions. The other way? Investing in multifamily properties. This is an oft-unknown aspect of the real estate market that is both more stable than investing in the stock market and easier to do than trying to buy a single family home. There are also tax-advantages to buying property directly, which REITs do not provide.
Lone Star Capital, a New York City based firm founded in 2018 is leading the way in multifamily property acquisitions in Texas. Rob Beardsley, a principal at Lone Star Capital, even wrote The Definitive Guide to Underwriting Multifamily Acquisitions.
In it, Beardsley explains the process behind underwriting multifamily properties in simple language, as well as how to properly structure a business in this field. For its clarity of purpose and thought, Beardsley’s guide has received many positive reviews and sits at a 4.6 star rating on Amazon.
Beardsley and Lone Star Capital have seen rapid success in this segment of the market, and have to date acquired over $300 million in multifamily properties in Texas. Part of their achievement can be attributed to how seriously they treat cash flow fundamentals. Research and due diligence is a fundamental part of their process before making any decision. As an investment, multifamily properties return rent, meaning they earn passive income. This can be likened to earning dividends on ownership, which is a safer way to invest as generally investors are less likely to offload their investments that still generate passive income, even in times of economic turmoil. The firm is also vertically integrated, allowing greater control over their properties. In 2021, Lone Star Capital launched a subsidiary property-management company, Radiance Living, in Houston to help manage their many properties.
If you are interested in reading more on Lone Star Capital’s process, you can visit lscre.com and even download their free underwriting model.
