CREI Partners Webinar: Diversifying Investments with Multi-Family Real Estate

All right, so today we're gonna talk about diversifying investments with multifamily real estate. And I really want to hit the home on diversifying because I don't view there are some deal sponsors and investors that are just that are all in on multifamily or office, whatever the investment may be. But I do feel diversification is key. And, you know, people would say that, you know, invest 80% of your net worth in things that you know and you love and maybe 20% in things that, that you're not so familiar with. And so with that, I know Peter's a financial wealth advisor and there's many others out there. So this isn't to replace, it's more to add and diversify. And hopefully my presentation will at least get your feet wet a little bit where you are wanting to learn more. And at that point I'd love to dig in. I am going to spend on a couple slides, a little bit about myself and my company. And then afterwards it's all about high level multifamily. There's no sales pitch or anything. I'd love to have the opportunity to speak to you all one on one afterwards at some point. But that is not my intent or purpose here. It's more about educating and hopefully getting people thinking about, you know, passively investing in multifamily. So, Peter, thank you for the introduction. You know, there's really not much to add to this other than I'd love to tell you who these cuties are on the left. My wife, Jennifer. We've been married since 2009, so I don't know how many years that is coming on 11 in October. And my youngest is Emma. She's in my wife's Jennifer's lap. She's in kindergarten. Lily is in first, first grade. She is seven and Hunter is eight. He's in third grade. So we're in the Bee Cave, Lake Travis area. And my wife is being super brave in that she's home teaching them full time. She took them out of Lake Travis. So it's really interesting. But just the life we live right now. So hopefully things will get back to normal. This is that one slide I want to tell you about what we do. And then the rest again is it's more high level informational. So CREI Partners provides opportunities for investors to grow and diversify their wealth in purchasing large multifamily apartments. So we do this and this again, high level. We'll dig more on those one on one if you'd like. But we raise money to buy assets. So we pull money. So, you know, if we're buying a $10 million asset and we need 3 million to close and have some capital improvements, then we'll raise that money. So we're not, you know, it's not my 3 million or one person's 3 million. It's multiple people of 50 to 100,000 or more that we're pulling our money and buying these larger assets. We focus on value add, real estate and we'll talk about the different classifications of real estate based on risk for the investor. But we're more value add and we'll again talk about that shortly. Every property that we buy, we're looking at a property in Houston right now. And I'm already having our construction team go out, determine, you know, the cost and the renovations, the strategic plan before we even do a letter of intent. And so there's a lot of work that happens before we even do a letter of intent. And then we do a letter of intent. We'll negotiate price, buy the property and then day one, execute that strategy. Isn't the time to like, then figure it out. It's before we even go into a property. We already know what needs to be done and we've already presented that to the investors along with the team who's executing that strategy. We'll distribute returns to our investors. Our typical return, 7 to 9% annually. And we'll talk more about cash on cash and IRR. But overall it ends being about a 12 to 15% IRR over a five year period. And then we'll implement our exit strategy, typically five to seven years. And then at that point again the limited partners or the passive investors will receive their profits along with the GP. And we'll talk more about how that GP, General Partner, Ltd. Partner ties together. So that's it on that. Now let's get into, you know, what is multifamily. So this is the discussion points against going to be a lot of high level. This is hopefully again to get you excited to want to at least learn more, not to say you have to invest because every, unless there's a deal and opportunity, there's no stress or about investing in the property. But if you're learning about diversifying and how multifamily or real estate in general can grow your wealth, then this is a starting point. So we're going to define multifamily, we're going to discuss why you should invest in multifamily. We're going to talk about the two types of real estate investors Risk profiles. We'll talk about financial metrics, legal must knows, market cycles and then closing and how to learn more. So with that, let's get started with defining multifamily. So in short on this. Multifamily is considered apartments, high rise apartments, garden style, but anything over four units or more. We focus more on 50 plus. But if you're an active investor wanting to source and find your deals, you know anything, if you have a 4 Plex or more than you're in the world of commercial real estate, that's considered multifamily. So there's several reasons why we or why I personally invest in multifamily and why I encourage others to consider it. And this isn't to again knock stocks or bonds or mutual funds 401k. Those are things that I still invest in, I still have. But what I tell my family and others is real estate has just been a proven resilient asset class. And we'll talk about even more on why multifamily, but just in general, over the last 70 years there's been more up years than stocks, bonds. Now there's still great returns. Everybody has experienced this last year, including myself. The ups and downs of the market cycle and things are going well one day and then you lose all returns. We're not seeing that on the multifamily or real estate side just because it's more risk tolerant. People are paying rents, you know, expenses are being maintained. We have the power or the decision making on reducing capital expenditure. So there's just more control at the local real estate level. It's tangible, it's a property, it's an investment that you can go and your owner, you know, we're not asking or you know, these deal sponsors aren't asking for, for debt. I mean you can provide a loan, but this is more, you know, you passively invested, you are an equity owner in a property and with that, you know, there's benefits such as risk resilience. As far as asset classes, you know, apartments over the last seven or between 1987 to 2016, assuming that a property was held for seven years, averaged about a 9% annual return. Compare that to industrial, office, retail and hotel. So there are, you know, I've on the CBRE side focus a lot on office and retail and we'll talk about asset classes and such on that. But the end of the day for apartments, people need a place to live. Even during struggling times like the pandemic. People may be downsizing or multiple families living in a unit. But at the end of the day, shelter is a Maslow law of a need. And so it's going to continue doing well despite what may be going on in the external environment. When I talk to passive investors and others that are looking. One of the biggest benefits of getting into multifamily or real estate in general, is the depreciation is the tax benefits. You know, if you sell your stocks, your investments, you're hit with a tax liability during tax season, where in multifamily you can offset that those returns through depreciation. So there's three types of depreciation. Again, high level, I'm going to have a cost segregation webinar in October through Madison Specs, who will dive a lot more into this. But for now, high level, you know, depreciation in multifamily is 27 and a half years. So that is the improvements, the property, not the land. So the property itself can be depreciated. If you just do a standard or if you do a depreciation, it's over 27 and a half years. So in this example, if you have a 25 unit apartment building, you bought it for three and a half million, the land is valued at 750,000, so that the remaining 2.75 million is depreciable. So if you take the 2.75 million divided by 2.7 or by 27 and a half years, excuse me, then you're about 100,000 a year in depreciation. So what does that mean? So if you have $100,000 in revenue and you offset that by $100,000 in depreciation, then your tax liability is zero. Now say again. So if you've made $100,000 on that property that year and your depreciation matches that, then it's a zero tax liability. Or if you're at 150,000 in revenues and it's 100,000, then your tax liability is on that 50,000. So huge benefits. And that's just regular depreciation over 27 and a half years. Then there's accelerated depreciation and that could be a 5 to 7, a straight line depreciation. So, you know, there's depreciation where you would hire a cost segregation engineering firm that would come in and do a full analysis on the countertops, the floors, the, you know, the roof, the structure itself. And instead of bucketing every improvement on that land at the 27 and a half years, you get a faster depreciation. So Instead of that 100,000 depreciation, maybe you're getting 2000-003003-00000 or more that you're able to depreciate again offsetting your returns year over year. Then you have bonus appreciation. Bonus appreciation was put into law after September 2017 and that's where owners can take their investment 100% of the benefit year one. So those are, you know, if you have a huge tax liability that you're expecting, you buy a property and by, you know, 100% appreciation or depreciation in that year, then you know you're, it's massively offsetting your taxes. So I'm not a tax consultant, I'm not a tax advisor. I do have great partners that do that and specialize that are CPAs. And I know there are Rotarians in our club as well. So reach out to them, they will definitely be able to assist further. But this is just a huge benefit I really want to hit on multifamily. Now there are tax taxes at sale so I don't want to make it sound like there's no taxes. There are capital gain taxes. If you are investing with a self directed ira, there's UBIT taxes and so there are taxes at the end. But again while you're having cash flow year over year during the whole period, you know, there is those tax benefits. And then there's, you know, there's a few more reasons before we'll go on the next is return on investment. So we've all want mailbox money. Passive income. I wrote a blog, I was in Montana, my wife was graduated Montana State many years ago. But we go there often, visit family and I always wonder like how do people survive or live up there? And Bozeman is getting more tech and life sciences and they've got the university. So there's, you know, there's an economy there for sure. But in talking with one of the brokers when I was there this summer, he mentioned that a lot of people here live off passive income. So that passive income, you know, can come from different types of investments. But one of them is multifamily and investments in real estate. So after the expenses are paid, depending on, you know, if it's a 7, 8, 9, 10% return, whatever that individual property is, that's paid to passive investors first before the general partners get money. So you're on our deals at least in every company may do things different. There's equity splits. We do preferred returns. So investors are getting their preferred return typically 7 or 8% annual before we touch touch it. We do it quarterly. Other Deal sponsors do it monthly. So as you meet deal sponsors or syndicators, you'll get to know how they compensate their investors, but also on what frequency they do it. So return on investment's huge. It's passive income, mailbox money. Then you have market demand. Now we focus on Austin, San Antonio and Houston. But you may have a friend or deal sponsor in Denver or Miami where have you. So every market is going to be different. I can speak for our markets. There's huge market demand. You know, people coming in from California, people coming in from the Northeast. I would say most of the Sun Belt cities are having huge market demand growth. And as that population growth happens, you know, and you see here in Austin in particular, where pricing for a home is extremely expensive and getting more expensive by the day, where there's declining homeownership, plus you have a generation of people that don't want to be tied to a home, so they are renting more. So that all benefits multifamily. And all that demand with the limited supply are driving up future value. You look at Tesla coming into the market, these other, you know, Apple developing, you know, these are all pushing demand for multifamily housing. On the renter side, leverage is huge with any investment. You know, if you're able to lever other people's money, in this case debt. So the banks, just like when you bought your house, you know, you might have put a 20% down or 10% down, whatever that was, but you needed a down payment. But the remaining 80 to, you know, 90%, maybe 100% if you're using VA home loan, you know, that was huge leverage for you to be able to buy your property. So same thing with multifamily. And again, you know, I can speak for myself, there's others, but we're buying large multifamily assets that could cost, you know, 5, 10, you know, $15 million, and we're able to get in at 3 million pre Covid. It used to be a 20% down, but I changed it to 3 million because we are seeing lenders do more of a 75% to 60%. Yeah, 75 to 60%, depending on the market loan to value. So. But still, leverage is key here. And then one thing that, you know, we don't take as like definitely going to happen, but it's definitely a benefit is appreciation, amortization. You experience it with your house, where you're paying your mortgage, it's reducing principal every month. And Austin and these markets typically are growing in value. And so there's appreciation and amortization. So those are just more reasons to think about considering in multifamily. So I'm gonna talk about two types of investors. So if you're investing in real estate, you're gonna be one of these regardless. If you're doing a single family home, a multifamily, an office, retail, it doesn't really matter. You're gonna be in one of these buckets. So the passive investors are those that are placing their capital into a real estate syndication. They're maybe a full time teacher or an attorney, a doctor, engineer, etc. They don't want to be full time hands on on real estate, but they want the benefits of real estate investments. So what they'll do is, is they'll passively invest with a deal sponsor or a company that focuses on real estate investments. So these passive investors are limited partners and we'll talk about that shortly. The opposite of a passive investor is an active investor. If you're out and you're going and finding a duplex or a larger property and you know you're actively sourcing those deals, you're actively networking with brokers, working with lenders, working with contractors, you're being fully active, hands on, on the project. So those are the two. And again I'm going to talk more towards the passives, but at the end of the day, you know, the actives. I think this presentation will help active investors as well. So let's talk about risk profiles. So depending on where you are in life and your money situation, at the end, end of the day the number one priority is cash preservation. So in multifamily or whether stocks, at the end of the day you want to keep obviously the investment that you put in. But there's levels of risk profiles depending on just like in the stocks or growth stocks or value stocks and such, where you can put your investment. So I want to do a high level of each of these. So core assets like right now where I sit today is at 100 Congress. It's institutionally owned. MetLife and Invesco own it. You might have seen it's on the market for sale. So if anyone's looking to buy 100 Congress, it's on the market, but it is institutional type money coming in. It's in a great location, it's a great solid asset. It's highly leased in the high 90%, the management's already in play, the renovations have happened. It's a safe investment. Now with safe investments or these institutional quality investments, typically it's a retirement fund or a pension plan that is needing. They want that cash flow, but they don't want to have huge risk volatility. So a core asset could be owned by again like teacher retirement funds, etc. But at the end of the day, with it being lower risk, there's lower returns. So typically you will see maybe a 5, 6, 7% return with those core assets. A core plus is just a step up from that. There's minor renovations that need to be done. Maybe it's a fitness center or you know, back of the house engineering to ensure that they're able to take care of other tenants. You know, from an operational standpoint, again, core plus in the multifamily could be it's a class A property in a class A neighborhood. But it looks tired, it looks dated, it needs to be renovated just slightly to keep up with the market trends. Again, it's low risk, it's lower returns. So it's not a bad thing at all. It's just where you are in this risk profile. Then you get into more of a value add. Value add typically are properties in multifamily from 1980 to 2000. And those properties are needing some type of renovation to compete or reposition to today's market. Value add are typically cash producing, so it may be six months before investors start benefiting from those returns. But it's not a huge lag time. There was a strategy to implement, return reposition, increase rents, reduce expenses, and it's in a short amount of time. What's nice about value add is you do have those annual returns, typically 7 to 9%. But at the end of the period, five, seven years, when it's time to sell, that's when you've bought it at a value, you've increased value through increasing rents or managing the expenses better. And then you have this huge value opportunity at the end when you sell to an investor. So again, it's sort of in that middle now, an opportunistic fund. Now this is going to be higher risk, but it's going to have a lot higher returns. Typically you're not seeing cash flow in two to three years. You know, you're doing a full repositioning or maybe you bought raw land and you're redeveloping. And so there's just, it's more of an opportunistic at the end where you know you're able to really maximize your wealth through that. So, you know, we focus more on value add. But depending on where you are on the risk profile and, and what you're comfortable with investing, you know, you're sort of in these, in these buckets, so hopefully that helps with risk profiles. The next thing I want to talk about is financial metrics. And again, all this is pretty high level. It's a lot of information, but hopefully as you, you know, it's just touching it and then digging in more. But in multifamily, specifically, you're going to hear a lot on cash on cash and internal rate of returns, equity multiple. So cash on cash. Think of it like your annual returns. You put in a certain amount of money and the cash flow that's being produced by that investment that you made is cash on cash returns. Okay, and we'll give an example of that shortly. The internal rate of return helps you look at all the cash flows of all the years. Say it's a five year hold. What are all the cash flows each year for those five years? And then what's the exit cash? So if you've profited 300,000 at the end, well, that 300,000 plus those annual cash returns discounted to today's rate gives you your irr. And then your equity multiple is the other. And that equity multiple is just a way for you to calculate a rate of return, your investment. So if you've put in 50,000 and you know your return is 100,000, you know, then you've had, you know, 2x your money, you get your money back plus the return. So this is calculated by, you know, dividing the total cash distributions, your cash flow by the investment made. And this is an example. And again, this is just throwing this out there to illustrate what I'm talking about. So if you made a $50,000 investment and year one you had a preferred return of 7%, then your return on that 50,000 is 3,500, say year two, rents were increased, expenses were reduced, and we were able to maximize profits. Like a business, we're trying to maximize the bottom line based on revenues and expenses so we're able to pay investors more. So seven and a half percent was returned. Year two, 3750 went your way. Year three and four and year three and four went the same way. Operations were streamlined, rents increase. We were able to get eight, eight and a half percent to our investors. Well, year five, we sell the property or the deal sponsor sells the property, and then you get an $87,500 check or deposit, you know, that year, because it sells well, the overall investment from year one to year five, you've made $103,000 on your $50,000 investment. And so your multiple is a 2.06x, right. And your internal rate of return, if you look at all of your investments from year one to five compared to what you made on the investment, you're at a 17% IRR. That is huge. And I think in today's market, I mean making 7% consistently and on a preferred return, where else is the money that you're able to invest in? Now going back to that earlier slides, stocks and other investment categories get there, but there's ups and downs, right? And so this as part of diversifying just gives you a more predictable stable while you're still investing on these other things. It's just something to consider. I will say personally and again, I'm not doing a sales pitch or anything, but typically deal sponsors, at least on my deals, if I'm not hitting a 7% annual or coming out at a for us like 1.7 to 2x over 5 to 7 year hold, 12 to 15% or more on IRR, then we're going on to the next. And so there's a lot of work to find those properties. But if we can find those properties and deliver these returns, our investors are happy to keep returning. So some legal must knows. I'll let the slide load fully. But the next part of this presentation is going to be talking about accredited versus sophisticated investors. So depending if you're accredited or sophisticated and we'll talk about those terms, determine what deal you actually invest in or what type of deal you can invest in. We'll talk about securities offering table, that is, you know, comparison of 506B, 506C and other exemptions that the Security Exchange Commission allows. And we're going to talk about documents like a private placement offering memorandum, discuss general versus limited partners, and then an operating and subscription agreement. These are all things again, it's I'm not an attorney. Talk to an attorney on this, but at least you will have an idea of when someone's talking about are you accredited or sophisticated or are you doing a 506B or 506C offering? At least you'll know or want to dig in a little further. So let's start with accredited versus sophisticated. So an accredited investor is an individual in all this. Let me back up. All these two terms are defined by the Security Exchange Commission. Okay? Sec. So an accredited investor in the secis is an individual who qualifies to invest in real estate syndications by satisfying one of the requirements. So an annual income of 200,000 or 300,000 if you're, if you're joint, you know, married or a net worth of at least 1 million, not including primary residence. So what this is saying pretty much is that at this, at the salary point, investors or these people that are making 200, 300,000 or have a net worth of a million dollars, they've likely invested or done business or done something that should make them able to analyze a deal and know if it's something that's worth them investing in. Right now a sophisticated investor is really people that don't meet that accredited investor status and that's someone who still can invest in certain deals and we'll talk about which deals. But at least they have the sufficient knowledge and the experience to analyze and ask questions on the financial and business matters related to the investment. So again, accredited and sophisticated. And where that comes into play is on this. And I'm really going to dig more into 506B and a 506C offering. Okay. Security Exchange Commission. Typically when you sell an investment publicly, you have to register that investment with the Security Exchange Commission. Well, the SEC has come out and said there are exemptions. Right? And the exemptions in this case are regulation B and regulation A. I'm going to dig in on regulation D, 506B and 506C here. So both, both regulations here, 506B and 506c, you can have an unlimited amount of raising capital. So if I'm raising a 3 million dollar or $100 million, it doesn't really matter, you can raise that capital. Right now there are different types of investors who can invest in each one. So with the 506B, those 506B are unlimited amount of accredited investors. So I can have an unlimited amount of those, but I can only take 35 sophisticated investors. So if you don't meet that accreditation status but still want to invest in multifamily, you can do so through 506B offerings. And that's what you know, we More so do 506B. The accredited investor just has to self certify that they meet the accredited investor net worth or salary requirements. And then their state, state filing requirements differ by states and there's no ongoing. So that's 506B. If you Google do anything on multifamily after this, you're going to start getting Facebook ads in a 500 and those Facebook ads are going to tell you invest here, make these returns. Well, those ads are being run through a 506C offering and that 506 allows that deal sponsor to publicly fund that investment. Now, it's limited to accredited investors only, so sophisticated investors are not allowed in 506, but they can publicly advertise and raise capital through the public. There's not a minimum number on the, the number of investors, etc. But you know, those are the two things. And I've got a blog on my website, Crei Partners, that goes further into 506B and 506C. But those are the two that you will mostly see on the, on the multifamily. So hopefully that explains that. Now, with the private placement memorandum, if anyone here has ever bought a timeshare or looked at an investment, you know, you would have gotten a document that talked the good, bad and ugly. You know, it's a document that really should describe the risk of the investment and the terms of the investment. And so if you're working with a deal sponsor that's not providing that ppm, then that should raise, you know, a big flag. You know, a PPM is property by property and it should be done by an attorney that the deal sponsor pays for and that they're doing to then get their investors to read and really understand the investment. So this is just a table of contents of our ppm. But you know, it goes into the warnings, goes in the state notice requirements, executive summary, talks about the terms on, you know, what should investors get or what do you expect from a preferred return? You know, after that return is hit, what are the splits after that, what's the period of the expected period of the investment? Is it a five year hold, seven, ten year, et cetera. So this ppm, it's not sexy, it's not a lot of pictures, it's a lot of legal jargon. And when the deal sponsor, whoever it is, is working with their attorney, it's pretty set. Now if I'm doing a $3 million raise and you bring in a million, then there may be things that we're going to be able to adjust. But typically from a deal sponsor standpoint, this document is set so that way it's reaching broad investors that are putting in 50 hundred, 200,000 in and there's not a lot of room. With that said, you choose if you're going to invest or not and work with your attorney, your tax advisor, make sure it's a good fit for you. But just understand that, that ppm, please ask for that PPM, regardless of what deal you're looking at, to fully analyze and look at the, the risk and you know, the rewards as well on investing. So we've talked a lot about passive and active investors. And so it's when there's a, if you think about every property is a business, okay, Every property is using an LLC or a limited, or maybe it's a limited partnership, but you know, for our deals it's an llc, right? And so that LLC has a general partner and a limited partner. So the general partner are the active people that are making the deal happen. Maybe it's the deal sponsor, it's somebody working on asset management. Maybe on the construction side, it's the people that are executing the the entire project from start to finish. Okay. The expectations of that GP is they're implementing the business strategy, they're communicating to the other partners, limited partners, they're sending accurate financial statements, distributions, every tax season, they're providing you a K1 so you can put it on your tax returns. And from a GP side the financial impact is we're responsible for the debt. If the deal goes south, we're responsible for, for the debt. Now there's non recourse and recourse loans, but you know, that's a different subject. But at the end of the day the GP is responsible for what happens the limited partner. And this is a huge benefit if you're passively investing, right? So the limited partner are the passive investors that are contributing the majority of the funds to finance the deal. Now on my deals I'm investing alongside you. I think it's something you should be asking your deal sponsors. But for the most part 90% or slightly more are from the limited partners. Now there are entirely passive. So their capital is locked in. That money is being put to reposition or implement the strategy of the property. Profits are not guaranteed. There is a pro forma, we expect things, we underwrite conservatively. And a lot of deal sponsors do. And as you build relationships with the deal sponsors, you'll see how they're underwriting and if it makes sense, is it conservative in a Covid environment, are they expecting year one rent increases or are they doing zero rents increases year one just to get through this time, then year two doing an increase. So those are again limited partners, entirely passive. They can go to the property, but they don't have any decision making or anything like that. The great thing about being a passive investor though is you're only liable for the money that you contributed to the business. So if you put in fifty thousand, a hundred thousand, whatever that is, your financial risk, you know, they're not coming after you for any other financial consideration. So when you look at the PPM going back to the PPM, you know, the document specifies the GPS and the LPs and how you know, things are going to be handled along with two other agreements. And I'm almost done with these slides but I think it again just important to know there's just a lot of legal that goes in. So the operating and subscription agreements are also documents that you'll want to see. Now operating agreement, it's a document that will go into detail about rules, regulations, provisions, you know, who is doing what, what is the distributions or you know, how is it all, you know, being split. So it's a document that's signed by the LLC and the limited partners, the passive investors, binding to a contract on how we're going to operate the agreement. Typically what you also want to see, limited partners do not have voting rights typically. But if you have a deal sponsor who is extremely unethical, they do something that really impacts the business, then there should be somewhere on the operating agreement that passives should be, you know, are able to, you know, vote that investor out. Right. So those are type of things that you'll, you'll see in the operating agreement. And the other is a subscription agreement. And the subscription agreement, just that two way guarantee between the company, remember the company being that property, and the subscriber, the investor on the number of shares and the cost per share and the projected returns. So those three documents, the ppm, the operating and subscription agreements typically are, you know, come in one package, they're delivered and then there's webinars and stuff to discuss it. But those usually are documents that don't really change but you still would want your attorney to review it and just make sure you understand it fully. So this is something that I like about real estate, having been in real estate the last 13 years, is the market cycles. The market cycles are going to differ from Wall street, right? And it's all about supply and demand. So we're going to briefly talk about the market cycles. And this is all from. The next two graphs are from Greg Mueller. He's a University of Denver professor who publishes these graphs. And so I just think it's helpful for anybody who may be more focused on stocks and bonds and sort of the economic drivers versus real estate where it's not really based on, you know, the, there's definitely economic impact but at the end of the day it's supply and demand. So let's talk about recovery. So this also is a circle. So one you Know, it goes recovery. Phase two, expansion phase three, hyper supply, phase four, recession. So typically in recovery, you're seeing negative rent growth. You know, you're below inflation, there's this increased demand, but it's still slow, right? Then you start getting into your expansion. Rents are rising, the demand is strengthening, supply is reducing. So you're able to get more high rental growth. It's a tight market. And that's where you'll start seeing a lot of cranes in the sky. You'll start seeing a lot of what we see in Austin. We're in expansion mode. The development is happening where we need more space, in essence, right? And so with that, you see higher rents. And this is a time where a lot of investors make a lot of money during these expansion times. But at some point with supply and demand, there's the hyper supply. And that's when you start seeing the reduced growth and rents. Things start delivering and there's a lot of space in the markets. And then you start getting into more of a recession area where, you know, you're having to absorb that space and, you know, there's negative rent growth and all. So this all takes time. It's not a day of like, oh, the market's just crashed. This is years, you know, that happen. And, you know, which I like. I mean, I think when you're diversifying your investments, having something like real estate, where it's not tied to, you know, what's going on at Wall street or politics is very helpful. So this was a chart that I was able to get. I haven't seen a second or third quarter, but this was first quarter, 2020 estimates. And you'll notice Austin is at the expansion mode. I think we can all agree that, you know, we are in expansion. You know, obviously Covid has hit us, but we still have companies like Tesla, you know, coming in. I know yesterday we heard Dell is doing some layoffs. So business will happen, contract and expand. But for the most part, Austin is benefiting from the tech, obviously from the university, government, et cetera. There's a lot of things growing Austin. So we're in expansion stage. Get into hyper supply. Look at San Antonio is in this hyper supply area. It's not a bad thing. I mean, there's still. The rents are still growing, but you'll start seeing as things become more of a hyper supply, rents decrease. Now Austin has a lot of class A delivering over the next few years, whereas San Antonio doesn't have that. So you'll, you'll see over time where Austin will have more dramatic rent decreases in class. I'm speaking class A than you would in San Antonio just because there's not a lot of delivering over the next few years in San Antonio. But I think if you look at that cycle from before where recovery, expansion, hypersupply. So most of America is in this expansion to hyper supply and we all know we're in a recessionary. So time will tell on what's going to happen in every asset class. Office, industrial, retail. It's all going to change and be different for each. All right, so if you want to continue learning more, I have a podcast, the Untold Stories of Real Estate Investing. I publish an episode every other week. Did one this week with Bruce Peterson, who's based out of Boston and does multifamily deal sponsoring. So check that out. It's on my website creipartners.com podcast. You can get it on Stitcher and itunes. If anyone wants to do a little bit more digging in on Investing, go to Creipartners.com ebook. It talks more, digs into all these topics further and again, it's free. It's just educational. And then if you have time, love for y' all to join. We have an investors meetup the fourth Monday of each month, 7pm and we do it virtually, but it's been great having really good speakers talk to us and we have breakout groups. You know, we have a good conversation and build relationships and trust. That's what this is, this game. It's a relationship business. There's another book and I don't get any profits off of it, but he is my mentor and somebody that's a general partner with me on our deals. His name is James Kanasami. He's invested in $130 million worth of properties in Austin and San Antonio. But he has this book and it's a really good book. I always recommend this, but it's Passive Investing in Commercial Real Estate and it digs more. At the end of the day, you want to be as educated as you can be to ask the right questions when being presented a deal because you know that trust factor with that deal sponsor is huge. But looking and analyzing that deal and I will say if anyone has an opportunity or deal, I'm happy to look at it and provide feedback. I'm not looking to not make your deal happen, but I just think it's important for people to have outside eyes look in and just make sure that everything seems to be conservatively written and underwritten. With that, I'm going to close out. This is my information on this slide. And then, Peter, I'll turn back to you. Wayne, thank you very much. That was a great question.