Apartment Empire: How to invest in Multifamily Real Estate with Axel Ragnarsson (SS #12)

What is going on everyone? Welcome to Spotlight Series number 12 here with the multifamily king himself, Axel Ragnarsson. Um, excited to have him on. Axel and I met through Isaiah initially. Isaiah was, um, kind of Axel's mentee for 4 or 5 years. We all went to UNH, um, but, uh, we kind of got our first multifamily deals with Axel, actually own some properties with them, potentially selling one. We'll see what happens. And, uh, but yeah, excited to have you on, man. How you doing?

Yeah, I appreciate the invite, man. It's good to see you.

Yeah, and also host of one of the— if you haven't checked it out— Multifamily Wealth Podcast. It's one of the number one, if not number one, podcasts on Spotify and Apple. So you've been building that up for a while. That's just been a phenomenal success for you.

4 years coming up on 250 episodes. Um, It's been a grind, but folks are listening to it, so I can't complain.

Yeah. That was wild. I had one of my buddies down here, actually. I don't know if he's watching right now. He's like, "Dude, you got to check out this guy's podcast, Axel. It's Multifamily Wealth Podcast.

So good." I was like, "Yeah, we actually—" Tell him to go leave a rating and a review. Appreciate it.

Yeah, honestly.

That's great.

Love it though. So, I'm just going to get right into it. What would you say is the biggest thing that has changed in the multifamily space since you had initially gotten started?

Oh, let's see here. Um, I got into this in 2016, so I'll assign some, some, a timeline around this. So 8 years ago I got into this. Um, it's in college, was at UNH, started looking at small 2, 3, 4-unit buildings to buy with hard money and private money. Um, I think the biggest thing, you know, if we're talking '16, '17, '18, we'll use the first few years I was in it, and then we'll fast forward to the last couple here. The market was significantly more inefficient at the time and it's much more efficient now. And I think that's for a couple of reasons. I think one component of this answer will directly answer your question, which is there's far more data available now and far more education available now as it relates to showing people how to be good investors and teaching people how to be good investors and then giving them the information that they need to make informed decisions. People think like 2016, not that long ago. And it really wasn't, right? It's not like the internet or something crazy has like really advanced in a wide way since then, but there's some big changes along that period of time. All of the educational resources available online has 20, 50, 100x, whatever it is, whether that's the prevalence of a website like BiggerPockets, whether those are podcasts like mine and content like you're producing right here. Um, whether it's the books that have been written on this subject, whether it's paid resources, courses, classes, what have you, um, it's far more difficult to be an uneducated investor of multifamily rental property, what have you, now than it was 8 years ago. It's almost incredibly challenging to not know how to successfully operate a multifamily property right now, and that's just on the educational side. And then on the data side, that's the whole other piece of it. There are far more real estate transactions now because the market has more capital infused into it. There's more investors just as a headcount of individual investors, and those investors are more well-capitalized today than they were back then. Um, and there's just more data as it relates to property management software, for example, has become far more sophisticated, and that data, for example, publishes out to far more resources, right? As one singular example of this could be a website like Rentometer. Like, that was maybe— I don't know when they started, but it certainly wasn't like a cohesive resource back in 2016, '17, '18. But now, whether it's Rentometer, whether it's Apartments.com, whether it's some other resource that, for example, provides data on rents, or whether it's a website or resource that provides data on sales, on cap rates, um, the knowledge available from a data standpoint to somebody who's looking to buy, who's looking to operate, is far more abundant, right? So for example, that leads to less mispricings of the real estate itself. That leads to less mispricings of rental rates, which therefore, which, you know, extrapolates upon sale to be a lower-priced asset, a more, you know, a better value-add opportunity. Um, it leads to less, uh, you know, less investors getting out over their skis from a debt standpoint relative to the fact that there are more readily available resources to understand what interest rates should be, what your term should be, etc. So I think it's the combination of those two things that have most significantly changed the market. Um, investors are just better. The baseline level of the, of intelligence as it relates to individuals buying multifamily rental properties, far higher. Um, and there's more data to support already a higher level of baseline intelligence as it relates to running, selling, you know, operating, etc., uh, multifamily assets. And that fundamentally leads to a much more efficient marketplace. Um, 8 years ago it was so much easier to find deals, right? And I think people look back and they say, well, yeah, it was easier to find deals because property was cheaper. But again, it's all relative in the moment as it relates to how easy it is to find deals. The way I think about it is, uh, at the time, similar to what you guys are doing now, similar to what we're still doing, we're sending a lot of direct mail, we're making a lot of cold calls, we were going direct to seller to find off-market deals, um, sending direct emails. And it was just way easier to engage in a productive dialogue with a seller who wanted to sell at a price that was discounted to market value in '16, '17, '18 than it is now. And that's because sellers are more aware of what their property is worth. The seller, the average seller is running their property more effectively and they're earning more money and therefore are less interested in selling. Or if they are, they can command a higher price. So long answer to your question, but I think it's more education, more data, and it's— and that leads to a much more efficient marketplace.

Yeah, it's, you know, phenomenally well said. And I would agree, even in like the wholesaling space, it's the, you know, the education that's out there. Because yeah, 2016, the internet still existed, but podcasts were not as popular, popular as they are now, right? There wasn't as many podcasts out there teaching people how to go direct to seller, off-market real estate, and those things. And we even see some challenges in, you know, not that we're well established, but people who've been in the business for a few years and you're trying to be realistic with sellers. You have these people who are entering the game because it seems so easy and they're just setting false expectations for sellers, telling them things that they don't want to hear. And it's tough for you to come in because the seller doesn't know the difference. They don't know that this guy just learned off YouTube, right? So you're trying to come in and be realistic, and it makes it a little bit more challenging. So I completely agree with that. Now, going off that, so how do you get an edge then? How do you get an edge in the off-market space now?

Yeah, that's a great question. I mean, it's, uh, volume and length of time. I think that's the easy answer to it that nobody really wants to hear because it's not like a hack or like a short-term fix. Um, but I can speak to this specific to multifamily, right? Multifamily sellers are on average, and this is speaking broadly, a little bit more sophisticated, a little bit more educated, right, than the owner of a single-family home. You know, that maybe, you know, maybe you have Aunt Sally who inherited her husband's rental condo and she's just trying to sell it, and she's, you know, she's very responsive to the sell your house fast for cash. Maybe she can be sweet-talked by a charismatic wholesaler that promises her the world, or a flipper, whoever. She's a little less familiar with the process and she needs her problem solved immediately. And now in the multifamily sector, as it relates to going direct to seller, we're typically dealing with people that don't have the same financial distress that maybe that, that, that's prevalent on the single family side. You probably got some tenants in there, they're probably paying rent, and you probably understand some level of what's going on in the marketplace if you own a 10-unit building, a 15-unit building, or even a 5-unit building, right? So there's less financial motivation. And oftentimes the deals that we're buying direct-to-seller on the multifamily side, it's because people want to save on the broker commissions. It's because they don't really want to disturb their tenants too much with the traditional sales process. Um, it's because we've just built great rapport and they trust us and they actually do think we're giving them a price that they are happy with and they just like us and they want to sell to us. Um, and then every once in a while, yeah, there's some financial distress, but it's pure— it's typically operational distress. It's the owner who's got a 10-unit building and they got a couple of couple of, uh, you know, tenants that aren't paying rent that they're working through an eviction on, and they're like, I just, I just don't want to deal with this anymore. I'm just fatigued and I want to retire. I want to get out of, you know, the business, right? So the long and the short of it, and the reason I say all of that is because of all of those reasons, we're typically not hitting someone with a mail piece and we're immediately converting them into a seller. It's, it's, it's a long process, right? So we're sending marketing and we're doing outbound prospecting, whether that's cold calling, cold email, cold texting throughout the course of a whole year. And then it's typically multiple years, right? So you have two levers that you can pull on if you want to increase the top of your funnel, right? You can do a higher volume of outbound, of outreach, et cetera, which you should be doing if you want to increase the chances that you're finding deals. That's, that's pretty obvious, but you also need to do it over a longer period of time. The other lever is just time, right? You just have to do this for a long period of time. And specific to where the segment of the marketplace that we're in, the sales cycle's longer. It just takes a longer period of time. And from the first contact to sale, it can oftentimes be 12 months, right? And it can be 6, 7, 8 contacts from a follow-up standpoint. So that's the edge. The edge is patience. It's not a sexy answer, but it's the real answer. I think if I were to give people something that maybe they can run with in a little bit more of a short-term capacity, Your market, I think, so strongly dictates your success from a direct-to-seller standpoint. I live in Boston, right? I'm not trying to do anything in Boston. Even if I wanted to invest in Boston, I probably wouldn't spin my tires from a direct-to-seller standpoint because I'm competing with people who have already solved for the volume and the time way beyond what I could even remotely compete with in the next multiple years. If I was really enthusiastic about buying a Boston, I'd probably set a long-term horizon. I'd start doing that. But with that being said, you can just go to a smaller market. You can go to a more tertiary market. You can go to a market with less competition. We're in real estate. We compete with each other. People don't like to admit it because it's a collaborative business, but there is a finite number of deals being pursued by a larger number of individuals, and that's the reality. So go an hour outside of a core market if you want to develop faster traction, if you want to increase the likelihood that you're going to have conversations and get a deal done. So go to some smaller cities, some smaller towns, more tertiary markets, and build the fundamentals there. Get your feet wet there, build momentum, and then you can start downloading that same process onto a more competitive market. And ideally, you're balancing the two of those things at the same time. So I think, you know, you have to have patience. That's the edge people have. People are so mentally fried with a TikTok attention span nowadays that like, It's really hard to have a 12, 24-month viewpoint, but if you can have that and then you blend in participating in a geographic area where there's less competition, you're going to start to gain some traction, which then makes it easier to have that patience as well.

Yeah, it's kind of like the Hormozy mindset. It's just simply doing more, doing more than everyone else for a longer time frame than everyone else is doing it, and you will find success. And at the end of the day too, obviously, I think you said it before, right? Confidence breeds confidence. But you also ultimately just have to have those conversations as well with the seller to get comfortable. Because you talking to a seller versus someone who has only spoken to 5 sellers, there is going to be a significant change. I think that's the other factor is yes, stay in it for a long time and do more than other people, but your ability to connect with the seller and actually talk about the property is is going to play a huge role in how many deals you get. And really, the only way to get good at it is just to do it a bunch of times, right? Because if you talk to 1,000 owners, it would be— you, you will be better than if you spoke to 10 owners. It's just, it's just a fact.

So yeah, and it sucks because it's not a fun podcast or YouTube video title, but unfortunately that's the reality. It is what it is, especially in multifamily. There's probably more short-term hacks if you're going after single-family assignments You know, there's probably some more, some stuff you can do around the edges that's a little bit more specialized, but in, in what we're doing, it's just time is the ingredient that, that puts you ahead.

Yeah, absolutely. And you even mentioned before we kind of went live here that, uh, your, your acquisition rep who's been with you, Justin, for about a year, started to see some fruits of his labor after like a year.

A year. Yeah. And you know what's funny is when, when he joined our, our business, like a lot of my very early conversations with him were You, you have to almost brainwash yourself to not get discouraged over the lack of progress you make over the next 3, 4, 5 months because the work you're doing now will hockey stick and pay off in more of a hockey stick fashion 12, 18, 24 months from now. And it's, it's funny, we were talking the other day, it's like literally happening. Like we're getting a lot of deals from owners who we first contacted that long ago. And it's, and the proof is in the pudding. He's in a situation where he's in like a, you know, a salaried role where he's earning a commission and it's a little bit easier for him to withstand that because it's, you know, frankly, it's a, it's a day gig, right? It's a W-2. For the investor out there who's not seeing anything and they're spending money on marketing and they're spending all this time with no return, it's much harder to do so. Um, but you have to understand that the— especially from a marketing and a prospecting standpoint to find deals, like specifically that what you do today pays off in 12 months. And if you get anything in the shorter term, we just consider that to be gravy. Yeah, absolutely.

I think there's another component to that as well, is the education component that he's receiving. You know, like, how much value is there? I guess this is a question too for someone getting started who wants to get into multifamily or investing. What's the value in going to work for someone who has success in the place, has the systems and processes in place, has the knowledge? Maybe you get paid a little bit less, but you're in that season of, of learning versus earning, and you still may be earning. But what is your thought on that versus trying to go out and do it on your own?

I wish I did it. I think that's the, that's the easy answer. You know, I started this by just banging my head against the wall and watching YouTube videos. And, you know, I was on the BiggerPockets forums way back in 2016 when there was a tenth or a twentieth of the people there, right? Just, you know, reading all the stuff and commenting and trying to learn and scrape to, you know, rub two sticks together. That was how I learned. And it was sheer— it was volume that, that taught me, right? It was volume of the outreach. We just— you were just mentioning it, right? It was reps. It was— I emailed a ton of people, and I just messaged a bunch of people's for rent ads, and I, you know, whatever, right? And eventually you start to get the hang of it. But it is much easier to shortcut the process if you go to a real estate meetup, or you connect with somebody online, or you connect with them through some other medium who's successful in some capacity in the lane that you want to be in, right? Whether it's multifamily, whether it's wholesaling, whether it's whatever, and saying, I would love to work for you for a, you know, $10 an hour, free, $10 an hour, whatever it is, some discounted rate, and say, I can take over your acquisitions pipeline. If we're talking, you know, you want to go out there and find deals, for example, I can take over your acquisitions pipeline. I can do all the outbound because that's specifically what is commoditized a little bit more so than the other stuff, right? You know, when we send direct mail marketing, like, that's— we're spending money for leads. We're very, very careful about who's picking up the phone when people call us back because We're paying for those leads. Now, and I had a bunch of— I mean, this is how Isaiah and I first met, right? He was an intern and he was making a stipend over the course of a semester, but I was like, hey, here's the playbook. Here's what I do. Go execute. And you can ride shotgun in any deals we find. I'll compensate you for deals that we find. I'll get you on the emails as I go back and forth and negotiate the deals. And that is a much easier way to go about it, is just to download somebody's playbook who's doing a volume of deals that you aspire to be doing. And to just see that through. And a really easy pitch to a current investor, right? If I have a young guy come to me or young, whoever, and they're like, "Hey, I want to learn multifamily, but I understand that step one is finding good deals, et cetera. Can you teach me how to do it?" I'll go and either A, do it for free. If you want to cut me into the general partnership, give me a referral fee, or maybe you just pay me some small dollar amount and I'm tied to you in a way. Yeah. I'll show you exactly what we do. I'll give you a list. I'll set you up with the tools you need to succeed. And then you can just go out there and execute. And the value is understanding what the prospecting strategies are and the messaging is and all of the nuts and bolts in that respect. But then you really get into the nitty-gritty when a deal goes under contract or you're, hey, I got this guy who's looking to sell. Let me connect you with him. Keep me on the emails so that I can facilitate the exchange. And then you're seeing the back and forth of the negotiating of the terms of the deal structure. And then when we get the deal under contract, then you can potentially ride shotgun through the lending process. You could probably see exactly how we're actually structuring the deal from an entity standpoint, from a capital raise standpoint. All of that stuff is what's really hard to learn. That stuff you don't really get in the YouTube videos and the podcasts to the extent that's really, really actionable. 'Cause it's like the stuff you don't even think about having to learn is all of the stuff that comes after you go into contract. And yeah, I highly recommend it. I would love to have done that, or I wish I would've done that back in the, you know, off the get-go. But I didn't know anyone. I wasn't good at networking back then. You know, I think for the young folks out there, that's an easy way to get off the ground and to at least build the fundamental skills you need in order to execute on your own side, to do your own deals. Yeah.

I think there's absolutely incredible value in it. Because at the end of the day, I forget who said it. Someone famous said, maybe it was like Henry Ford. It was in a book I was reading. But someone came up to, let's say it was Henry Ford, said, "Hey, I'll work for free." And he said, "Free is too expensive." Right? So even just working for someone for free is sometimes, you know, um, a privilege. So the fact that you can come in and not only get paid but you can also learn is just an incredible opportunity for anyone who wants to do it. And I think it's— if you're thinking, as Hormozy would say, in decades and not days, and you're— you want to be in real estate for the next 20, 30, you know, years, then why not just, you know, pop in with someone and just shortcut that initial stint of it, make potentially a little less money? But who knows, you could— because if you're on your own, there's so many more factors too. You're not just an acquisitions guy, you gotta worry about marketing and finances and all these things in the systems. So there's a lot more to keep track of. But, um, yeah, I couldn't agree more on that point.

And I'll add one note too, because I think you just hit the nail on the head. If somebody's like, hey man, I'll, you know, let me help you out, I want to learn, I'm like, well, I don't even know where to start, right? So if you're going to approach somebody, approach them with a very specific actionable plan of how you can add value to them. I will cold— if you give me a list, I'll cold call all the owners. I will be an emissary for your business and I'll pass you the leads and we can test to discuss how those are treated. Maybe it's on the management side, right? I will work, give me a discounted rate. I'll be, you know, if it's a property management company or an operator that's got it in-house, I'll go out there and be a leasing agent. I'll go out there and, and, you know, be a property manager at a discounted rate. In return, I'd love to, to X, Y, and Z, you know, in terms of like, I'd love it if you, you know, maybe hopped on the phone on a biweekly basis with me and kind of talk through how you're structuring some of the deals you're doing, etc. You know, so you, you should go to somebody if you're going to try and pitch this relationship with a very specific way of how you can help them, because you're right, it's hard to— it's hard for somebody who's really busy to think about how somebody can help them. You gotta kind of have to lead with that. Yeah, you gotta be—

at the end of the day, you gotta be really hungry though, because like you said, you gotta put in the work and maybe not see results for, for a number of months to be able to, to finally find success there. Um, so right now in the in the multifamily space. Interesting, right? I mean, you look back to after the bubble, that's really when it started to pick up, right? And it's pretty much been a bull market for multifamily since 2010. It's now 2024. Uh, what do you see right now? Obviously, um, you know, it's, it's an interesting market combination of interest rates being high and a lack of supply. Creates an interesting dynamic. But is multifamily, is it a bubble like right now? I know it's a very, you know, trite thing to say, but I feel like, is it kind of right now?

Yeah, I, um, I could go for like 20 minutes. I'll condense. Uh, it depends where you're in the country you are. That's a, that's a massive like asterisk here. Uh, major Sunbelt markets, um, which is basically Southeast, Southwest, Phoenix, the big cities in Texas, uh, Atlanta, Georgia, big cities in Florida, Um, Vegas— like, those are markets that whiplash crazy high and have now rebounded pretty significantly. Values in those markets are down depending on the class of property, 20, 30, 35%. Like, there's been price corrections there. Um, a lot of really enthusiastic investors that did deals in 2020, '21, '22 are losing properties to the bank. Those deals are trading at a discount to where they were trading at a couple years ago, and there's very clear price reductions in those markets. Now the Northeast is totally different, Midwest totally different. Um, one of the big reasons why it's different here is because we didn't have that national influx of buyers and, and this buying frenzy of— yeah, a lot of people are, you know, you're in Tampa, right? A lot of people move to Tampa, that's for sure. There was a high population growth in Tampa, a lot of jobs there, a lot of income growth. But Tampa is also a, you know, development-friendly city. Florida is a development business-friendly state. There's a lot of supply that was added in Tampa, a lot of ground-up construction. Very similar story in the Phoenix, you know, Phoenix, uh, Arizonas of the world, the Vegas, the Houston, Texas, the Dallas, all of these markets. Plenty of land to build, a lot of capital, you know, getting pumped into development projects, development-friendly, um, governments. That's very different than New England, right? Boston, there's like one apartment building under construction in the entire city of Boston, right? And it's like there's no supply being added, so in all of these markets where supply met demand or exceeded it, that means rents are coming back and values are coming back in a, you know, in a much faster, uh, at a much faster speed. So if you're an active local investor in those markets, you're probably in a position to pick up some pretty good deals right now. And maybe it dips a little bit, but we're probably going to head to the floor and rebound pretty soon in those markets. Now, in New Hampshire, for example, or in Boston, or in California, or in any of these states where development— it's, it's just, there's so much less development Um, rents have continued to, to tick up. They didn't— they aren't growing at the same speed they were in 2020 and 2021, but they're still, you know, they haven't declined really. They're still kind of significant. They're still increasing little by little. Values haven't really been hit that much. Um, you know, price per unit values are down a little bit in, in New England, but like not even remotely to the same extent that they are in the other markets I just talked about. You still have a lot of buyer interest. There's still a fundamental supply and demand imbalance. And those are the markets where there's slightly higher likelihood of, in my opinion, of a correction, because it hasn't really happened yet. It started to already happen in parts of the country. Now, I think that, you know, a correction is hard to define. What does that mean? The fundamentals of multifamily are still strong in that more and more people are becoming renters every day because it's virtually impossible to buy a house. It's crazy difficult to buy a single-family home right now. So there's more and more renters being added to the pool every day. There's not a commensurate amount of supply being developed to meet that demand. So there's still a supply— a housing shortage, which still drives rents, which fundamentally drives values. So yeah, if there's a correction, it's purely going to be debt-driven because interest rates are high and people aren't going to be able to earn the returns that they want. But that is somewhat offset by the fact that net operating incomes continue to grow because vacancy's still low and rents keep going up. So it's, it's really hard to define what that could look like. I feel really comfortable when we're doing deals in New Hampshire that like values aren't going to be significantly impacted in the short term, right? If we, if we lose 5-10%, which for example, like if you pay, um, $150,000 per unit for an apartment building for, you know, round numbers in New Hampshire, and it goes down 10% in value, so now you're down to $135,000 a unit. That's kind of been the difference that we've seen in the last couple years. If it goes down 20%, that means we're down to $120,000 a unit. That's a pretty significant reduction, but $120 a unit for a building that's $150— $120 a unit's where those properties were trading at in 2019, 2020, 2020, you know, early '21 before things really started to take off. So we're, we're correcting back to where we were just a few years ago. Um, and I don't, I don't really foresee there being a much bigger delta there because of the fact that rents aren't in a position to come down that much, which would then drive the pricing down. And it seems like interest rates are are not going to be— you know, we're not going to continue increasing interest rates. I mean, the Fed's come out and said they're going to cut a couple times this year, which are probably going to be marginal cuts that don't really move the needle. But it's unlikely that rates are going to continue going up. And even if rates stay where they're at, there's still a spread between where we're buying properties at, you know, 6.5% interest rate, 6.65, 6.7. We're still buying stuff that stabilizes to an 8.5, 9% yield on cost, and we're still seeing a spread there. Between our debt and where we're, where we're stabilizing properties to. So specific to where we participate, I don't think it's going to be that big of a change. Um, so I just said a whole bunch of nonsense. I think, I think that it depends on where in the country you're at. I think if you're in the Southeast, Southwest, you're probably approaching the bottom. Um, if you're in New England, if you're in the Midwest, if you're on the West Coast, maybe there's some further correction that can occur, but I don't necessarily think it's going to be that substantial because the fundamentals are still so out of whack. Um, and that is different than it was back in 2006, '07, '08, where the fundamentals— there was much more supply being built nationwide at that time, and the debt that was being used to fund that supply was way more, uh, yeah, it was just extremely out of whack debt in terms of high LTVs, adjustable rates, etc. We don't have the same debt. It's not the same debt dynamics now, and it's not the same supply dynamics. So I think that in general it's going to be a little bit more resilient Um, and until people figure out, you know, the government is really who needs to figure this out, how to incentivize more housing to be built, I don't necessarily think that it really changes that significantly. I think that's, that's really what has to occur here for, for things to drastically change.

Yeah, no, that's all, all really good. I would definitely, uh, rewind that. But, uh, yeah, I think it is interesting to note that from COVID the entire market, you know, real estate market, S&P, all that stuff went absolutely, like, doubled and tripled, right? So you still have such a buffer from where properties were, especially if you bought before that. So if things come down 10-15% because interest rates are higher, right? Because when interest rates go higher, prices go lower, you're not getting as big of a return. That debt service eating up more your cash flow, so your return is lower. Um, that's going to cause you to be able to pay less for deals, which you guys have probably been seeing, right? When you're underwriting now, you underwrite with a 7% debt service, and it's like you know, you have to be so much lower than when it was like a 3-4% debt service, which is something to keep in mind. But like you said, the rent growth is just going to continue to increase because no one can buy a house, right? So, and that's— it's getting more and more every day. So, uh, yeah, I think the correction is really just interest rates going up like you had said. And yeah, I think the market fundamentals are very strong. Do you see anything like— what would be a situation where do you— where things could, could plummet?

Is there a situation? Yeah, I think, um, if rates— if rates were to go up again, you know, if we raise rates again, um, you know, and we're back up to a 5-year or 10-year Treasury around 5, 5.5%— I actually haven't checked it today, but, you know, 10-year Treasury dictating typically how banks price their loans, um, because they just take a spread off of that. So when that goes up, interest rates go up. So I think that is predominantly what's going to drive that, because an increase in rates just, you know, doesn't have an equivalent impact on cap rates, but it does push cap rates. It makes cap rates expand because you have to buy and stabilize at a higher cap rate in order for you to service your debt effectively. Um, I think that different segments of the market are also going to be differently impacted, right? The lower cap rate segment of the market and all of those Southeast, Southwest cities I mentioned, those are all markets that are trading at 4, 5, 5.5 caps. Um, when rates were at 7, 7.5, like, there's— you're so far from being able to do deals at that cap rate that they, that they've now inched closer to high 5s, 6s, low 6s. Whereas if you're buying deals that predominantly trade between 7 and 8% cap rates, interest rates going up and down a little bit doesn't really affect it that much because you've maintained positive leverage the whole time, right? There's you're still able to do deals that cash flow and service the debt. So there's less of an effect there. Um, you know, I think supply really is the big thing, right? And that's why— that's the big— for example, let's just pick Phoenix. Let's pick on Phoenix, Arizona for a little bit. If anybody's listening to this and is in Phoenix, you should be buying everything you can get your hands on right now. Like, in Phoenix, old properties, 1970s-built properties, which is old, considered old for Phoenix, like, those are trading in like mid-4s, high 4s, percent cap rates. Absurd. Those are now trading in like mid-6s, which means they've lost 30-40% of their value. And so many people that paid those aggressive numbers are just totally out. They're giving them— they're giving them back to the bank. And part of the reason is that Phoenix has plenty of land, and Phoenix is like, yeah, develop here, we're very development friendly. And it was cheap to borrow money, so it was cheap to build projects. So an insane amount of apartments were built in Phoenix, Arizona. So now If you're the owner of a piece of rental property there, you're now competing with thousands and thousands of new apartments being brought online every year. So take the inverse of that, which is like a Boston where we're not building any housing, and now Boston is approaching the highest rent growth in the country because even though there's not that many people moving here comparatively to Phoenix, we're just not building any more housing. So it's like you add, you know, 2% population growth and zero supply growth, well, obviously rents are going to be affected. Whereas Phoenix, it's like, yeah, we're adding 10% population growth or whatever, you know, it wasn't that high, it was 5, 6, 7, whatever it was every year in, in, uh, influx in residents, but we're increasing the housing supply by 8, 9, 10%. We have more apartments that we got to fill up than people there is to fill them, so rents are going the other way, right? And that's what causes a downturn in multifamily, is rents going down, because once rents go down, your NOI goes down, and you're, you're, you have to pay less for that stream of income. And that's fundamentally what I think significantly changes a marketplace is how much supply is being added to that market. That's number one. And then number two, I mean, is again interest rates increasing, cap rates continuing to increase. Um, you know, the, you know, the last thing I'll mention is like broader economic challenges where tenants have a hard time paying their rent, right? So it's like if, if rent collections go down, and that could be, you know, uh, maybe you got a couple of employers in a certain market, they lay a bunch of people off because they go out of business, and now those tenants aren't able to pay their rent. And rent collections goes down, that also affects property value. But, um, but most of the country, we're in a situation where there's enough employment right now that that's not really a dynamic that's, that's, that's a concern at the moment. It's mainly supply and interest rates are the big two. Yeah, I love it.

That makes sense. So supply of the market, interest rates, rent growth, and then broader economic challenges that could impact rent collections, which I guess is rent going down, but another aspect of that. But incredible, incredible. I appreciate you coming out. I like to keep them short, you know, 30 minutes, just give them people a little taste. And, you know, if they want to learn more, like what you had to say, uh, like what she had to say here, they can, uh, they can check you out at Multifamily, um, Wealth Podcast, right? Spotify, Apple.

Where else are you active? Yeah, so Multifamily Wealth Podcast, as you mentioned, @multifamilywealth on Instagram. I'm, I'm pretty regular with the content on there. Um, you want to shoot me an email, Axel, A-X-E-L, at alignedrep.com. So that's alignedrep.com, uh, if you just want to reach out to me directly. But yeah, go check out the podcast, go check out the Instagram, and reach out if you want to chat.

Yes sir. You're pretty big on LinkedIn as well.

I try to be more consistent. You know, LinkedIn is— that's where you get all the organic growth. Uh, yeah, Instagram has choked out all the creators. They don't show their stuff to anybody new anymore, but LinkedIn's where they, they still put you in front of some new folks. So I'm trying to be more consistent there, but yeah, it's not easy. No, that's good.

Amazing. So last thing here, what would you say is the number one action step someone needs to take today if they have no experience investing in multifamily, want to get started?

Uh, I mean, you mentioned it, right? I'm big on the confidence breeds confidence thing. Um, You need to get educated on the fundamentals of what's going on here. Uh, like, you need to get familiar with the terminology. You need to get familiar with, you know, just how is multifamily valued. Um, there's plenty of resources, books, etc. You know, we, we sell a, a really exhaustive course that's, that's pretty inexpensive. Um, check the link out in my Instagram bio. Uh, but you got to get educated, right? Because you're not able to pursue deals, you're not able to have educated conversations with sellers, with brokers, with lenders with potential partners if you aren't educated on the fundamentals. So you need to develop a fundamental comfort, uh, or a fundamental comfort with cap rates and with, you know, income and expenses, how multifamily properties are valued, you know, what the financing looks like. So, so try to put yourself in a position where you get yourself educated, and then once you do that, um, don't spend too long. This isn't— doesn't take you a year to do this. It takes you a few weeks, couple weeks, right? I mean, this is pretty straightforward. We're not splitting the atom in multifamily. We're just trying to learn it. So Develop the fundamentals, and then after that, it's all about finding deals. So you need to network your butt off with the brokers, the partners, the etc. You should probably do some direct-to-seller stuff, assuming you got your financial situation in a position where you can pursue deals. But once you get the education, once you're ready to pull the trigger on something, you should be aggressively pursuing deals in channels that are not just pulling up LoopNet or Zillow. And just looking at the stuff that's publicly listed, right? Because that's, that's not going to get you— that's not going to give you the progress. And you want the reps, you want to talk with the sellers, you want to underwrite as many deals as you can, you want to offer on as many deals as you can. And that comes through getting in front of, of owners and individuals who are transacting.

Love it. Get educated, take action. That's it. Make sure the education doesn't last too long. But, uh, all right, I appreciate you. Till next time, guys, we'll see you.