RG 081 – U.S. Multifamily Outlook: Are we in a Multifamily Investing Bubble with Jason Post
- Jason is the founder of the Post Investment Group
- He started buying Laundromats when he was 24.
- He has worked on over 25,000 units.
Nuts and Bolts
Jason always knew he was going to be an entrepreneur, he started buying coin operated Laundromats in LA when he was 24. By the time he was 27 he realised that he could invest in something larger and so bought an 8 unit apartment building in LA and began his real estate investing journey. Jason formed the Post Investment Group 10 years ago with the aim to acquire more institutional assets in distressed environments. Since then he has acquired, owned and operated in excess of 25,000 units at an approximate value of $1.5 billion.
Jason chooses investment opportunities by keeping an eye on real estate cycles. He uses history as a predictor of the future and uses the following four metrics; rent, occupancy, interest rates and CAP rates. He measures these metrics and follows how when one changes it affects the others. It’s currently been 10 years since the last market reset and Jason predicts that the next one will not be as dramatic because we aren’t repeating the same over lending and over building as last time. Jason is currently borrowing money and underwriting with the assumption that interest rates will rise and so protecting himself. At this stage in the cycle he’s borrowing with longer term hols and long term fixed rate debt. This means that he can be less specific about where he invests because the most important aim is to keep the investing strategy specific rather than the market.
Jason hedges his risk by investing in low income tax credits, he buys deals that have 15 years of remaining restrictions. For example there was a deal in Seattle for $1 per square foot and the rent was restricted at this amount, however the surrounding market was going for $1.40 per square foot so he would be safe against any market dips. If interest of CAP rates rise they don’t affect affordable housing and then when the restrictions end in 15 years he can raise the rents up to market levels. He’s in a position where he doesn’t have to sell the properties now, so he’s happy to wait and benefit from the tax cuts for owners of affordable housing. He structures these deals for investors at minimum risk by underwriting deals with 65% leverage. This is interest only borrowing and offers a better debt service ratio coverage. He underwrites CAP rate expansion on an 8 exit CAP which he would never sell at that point but it’s beneficial to hold the property at this figure.
Since the new Presidential administration Jason has seen some changes in the investment market. There have been 2 sides to the effects; the positive side is for the multifamily world because Trump promised a relaxing in banking regulations, a reduction in unemployment rates and as a result higher inflation. On the other side the low income and tax credits side of the business could be harmed because of proposed tax rate changes although this is still unknown. These potential changes have created buying opportunities for Jason in the last year because he has been buying from people who had to drop their affordable housing deals.
- Most important habit – Keeping a proper structure to each day.
- Most influential person – His fathers friend who was a RE syndicator.
- Most important tool – His team.
- Most important advice – Start small; make small cheap bets and get smart.
Contact – firstname.lastname@example.org