Active vs. Passive Multifamily Investment, With David Robinson

Deciding on an active or passive investment role is one of the most important elements when evaluating multifamily real estate. Understanding the different benefits and challenges of small-scale active multifamily investment, versus larger scale passive investment in syndications is critical.

David Robinson, Managing Partner at Canovo Capital and Host of The Lead Sponsor Podcast joins the show to break down key differences and offer up successful multifamily investing strategies.

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Episode Highlights

  • The thesis for active investment in small-scale (under 5M) multifamily properties, including duplex, fourplex, and small commercial apartment buildings..
  • Why HNW investors should consider both passive multifamily investments with syndications, and active investment in small-scale multifamily properties.
  • What the pros and cons are for active and passive multifamily investment.
  • Why the outlook for Utah’s multifamily real estate market is strong, and how inflation is impacting it.
  • How the multifamily landscape will continue to evolve, particularly in Utah.
  • What David looks for when evaluating operators to partner with on multifamily deals.

Featured On This Episode

Today’s Guest: David Robinson

About The Multifamily Investor Podcast

The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses passive investment offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.

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Show Transcript

Scott: Hello, and welcome to another episode of The Multifamily Investor podcast. Scott here with you. And today we’re going to be talking about smaller-scale multifamily investment. We’re going to be talking about Utah and the multifamily market there and a lot more. And joining me to offer his insights is David Robinson who is the managing partner at Canovo real estate group, which specializes in multifamily in Utah, specifically, and elsewhere.

And he’s also the host of “The Lead Sponsor” podcast. David, welcome to the show.

David: Thanks, Scott. Appreciate you having me on. Look forward to our conversation.

Scott: Absolutely. Thank you for being here. Well, to kick us off, I found it interesting as I was looking at what you guys do that you do have this focus on small-scale, and we’re talking about duplex, fourplex, you know, small commercial apartment buildings. What’s the general investment thesis for these smaller-scale? You know, we’re talking under $5 million multi-family buildings.

David: Well, I think the investment thesis is going to vary, depending upon who the investor is and what their goals are. And so, a big part of our business… To back up a little bit, I’ve been a broker in Utah for roughly 18 years at this point. The vast majority of that time was spent on the residential side of the business, managing sales teams, managing a national franchise brokerage.

Not necessarily getting involved in the sales aspect, but the business management side of things. And about five years ago, I realized that I was on the wrong side of the aisle and needed to be in closer proximity to the investment side of the business. And so, really started to explore what that would look like, explored potentially moving my sales team into the commercial space.

The reality is that most of those agents didn’t translate very well into the commercial space. They were well equipped to be great real estate agents on the residential side, but didn’t necessarily transition. So, I really decided to go down to bare bones and start my own boutique brokerage that focused on a particular niche, which you’ve already identified as small-scale multifamily property.

And as I refer to small-scale, I’m referring to anything roughly $5 million all the way down to your typical duplex in fourplex. And so, what we do is we work with buy-and-hold investors who are looking to acquire that product type for their own personal portfolios.

And so, we have the opportunity to talk with a lot of investors. As you can imagine, there’s more demand for that product type than there is available product. And so, we get the chance to, you know, have a lot of inquiries about investing in small-scale multi.

And I realize that, you know, there’s a few different types of investors as I have these conversations with them. And getting back to your question about the investing thesis, it really comes down to “what is the goal of the investor?” Right? And so, I’ll have investors that as we get into the conversation, I find that they fall into two buckets mainly with some overlap in the middle.

And those buckets are, you know, the active investor who’s looking to build their own personal portfolio. They love the idea of owning their own property, managing their property, or managing the manager. They like the idea of having… You know, they’re okay taking on the responsibility of obtaining the debt and, you know, bringing the vast majority, if not all of the equity to the table, and also enjoying all the benefits of personal ownership, right?

The return profile on investing in small-scale multi-family property as a solo investor is probably higher than what you would get on the passive investing side of things, if you were strictly passive investing. But there’s also a larger degree of responsibility, and challenges, and hassles that the private investor would have to deal with.

And so, as I have conversations with our investors, they generally will lean to one side or, the active investor that’s wanting to buy something for their own personal portfolio and the passive investor who’s more of a busy professional business owner who isn’t necessarily interested in owning their own property, something that they can touch, feel, manage themselves and really have full control over, they just simply want all the benefits of owning real estate, the cash flow, the appreciation, the tax benefits, etc., and they’re willing to take a little bit smaller return profile than they would if they were to own their own property.

And so, as we’re talking specifically about the active investors, let’s set aside the passive investors for a moment, those active investors, it really depends on where they’re at in their investing journey. If they’re just getting started and they have some capital to deploy, then we would look to help them get into probably a duplex or a fourplex because that’s a great place to start, the debt terms are very favorable, it’s much easier to get debt on that product, and there’s way more options available in our market today for that type of product.

And then we’ll often deal with what we call our roll-up investors, 1031 exchange clients who have maybe bought a single-family property in the past, renting that property, or maybe they’ve bought a duplex or a fourplex and they’re ready to roll up into a small commercial property. And we help them with that as well. So, as far as, you know, investing here in Utah, what I tell my clients is, “Look, there’s a lot of great reasons to be buying real estate in Utah.”

The economy is booming, not unlike the rest of the country, but Utah also has seen incredible job growth. It’s known as silicone slopes. They coined that phrase a handful of years back, and it’s really become true, a lot of tech companies coming in this space. And so, there’s a ton of growth happening.

Rents, there’s a big gap right now between the median home price and what you would pay for median home price and where rents are today. So, I do believe that there’s still a lot of growth from a rent perspective, but what that leads to is that it’s a low cash flow market and a high-growth market. So, for a lot of our investors, if they’re okay with that, if they understand that they are going to be investing in a location where they have the potential for high growth but they’re probably not going to experience a lot of cash flow, then they’re a great fit for our market today, especially in small-scale multifamily.

If they’re not, then we explore passive investing in other opportunities that may provide them a better blend of both cash flow and appreciation.

Scott: Right. And that kind of flows into what you’re talking about as sort of that buy-and-hold, because if you’re okay with the lower cash flow, but then the idea is your time horizon is just much longer, so then that kind of gets that value for them, right?

David: Yeah. We’re generally not working with anybody who’s looking to turn a property quickly. If they’re looking for that, we’re not the right fit. It doesn’t mean that there’s not that type of property available, we’re just not the right match for them. We strictly work with buy-and-hold investors who have at least a 10-year time horizon.

Scott: Right. So, buy and flip, you know, that’s elsewhere. Some other guys can help with that.

David: Right, right.

Scott: I’m curious, you mentioned those two big buckets, and I think that’s a really great way to sort of illustrate it. A lot of our audience is high net worth passive investors who are just interested in, you know, what we’re talking about here, is getting that exposure to real estate, specifically multifamily, but they don’t necessarily want the headaches of managing a property and all that entails.

I’m curious, what might the benefit be, or I guess, advantages for them to consider adding something smaller-scale and being more active and having an active piece of their portfolio?

David: I don’t know that I necessarily recommend it. If someone’s, you know, a high net worth individual, busy professional, high income earning and they haven’t experienced personal ownership in the past, I don’t know that I’d necessarily recommend it. What I find is that there are certain investors who generally will lean to the active side.

They want control. It comes down to a control issue, right? And when you’re investing passively, you’re relying heavily, heavily on the expertise of the sponsor. And there’s wonderful benefits to that. If you’re looking to buy your own property, well, all the responsibility is on you.

And, of course, with professionals in play, you know, third-party property management, if you’re so inclined. But what I would say is that as I have the chance to talk with investors, they will naturally lean to one side or the other with some overlap. So, I’ll have some clients that have been strictly passive investors in the past, but maybe they’ve retired, maybe they’ve built up a significant amount of cash flow, and they like the idea of actually becoming more active.

And so, they’ll dip their toe in the water and maybe pick up a small commercial multifamily property to get some experience in that space and then decide if it’s something that they really want to push into and have a bigger part of as an active investor. And then, again, on the flip side, many of our investors have zero interest in passively investing.

They want control, they like control. They’re totally fine taking on the responsibility and burden of owning their own portfolio. In fact, they prefer it that way. And, in most cases, as we run a side-by-side comparison, they’re going to achieve a higher return profile than they would if they were strictly passive investing.

So, to get back to your question, it’s circumstantial. You know, I don’t know that I would… If I was a passive investor, strictly passive investor, I was finding success in the passive investing space, I don’t know that I would go and dip my toe, you know, just for the fun of it into small-scale multifamily property. On the flip side, if you’re an active investor and you’ve built up a large portfolio, I think that there is a pretty good argument to eventually scale into strictly passive investing.

But it comes down to circumstance and where you’re at in that life cycle.

Scott: Right. Absolutely. From the passive investing side, you know, your business has syndication for larger deals, and that’s outside of Utah as well, right?

David: Yeah. In fact, it’s primarily outside of Utah. So, our thesis… Well, let me back up. As we started to specialize in the small-scale multifamily space in Utah, I would get on these conversations and I would talk to would-be investors and they would express interest in buying a sixplex, eightplext, a twelveplex, a fourplex, whatever it might be for their particular financial needs.

And as we would get into the conversation about what that process looks like, not only the process of obtaining the financing, but also the management, the repairs, the maintenance, and everything else, they would realize, they would self-realize that maybe active investing isn’t really what they wanted to do.

They like the idea. They think in their minds, if they’re a newer investor, they equate investing in real estate as having to be an active investor. Right? Whereas as we get into that conversation and they realize, “you know what, I actually don’t want all of that stuff, I just want the benefits,” then that’s when we decided to really explore.

So, let me back up to your question. Your question was, you know, how do these two things work? And as I was having these conversations with our active investors, I realized that there was a gap in our offering, that there was a significant portion of the members of our investor network who had zero interest in actually owning their own personal portfolio.

That’s when I set out to go and learn more about passive investing. And so, a handful of years ago, I started to really learn about that and explore it and become exposed to real estate syndication and investment funds. And that’s when I realized, “Okay. This is a pathway for us to provide a solution to this significant portion of our investor network who wanted all the benefits of owning real estate without the headaches and hassles and challenges of personal management.”

Scott: Sure.

David: And so, that’s when we started to integrate syndications and investment funds into our business with an emphasis on finding opportunity with quality sponsors in markets outside of Utah. Initially, we were focused exclusively on the Midwest because we were looking to provide our investors with a better blend of both cash flow and appreciation.

Here we are in a high-growth market in Utah, cash flow is very stingy, especially in the small-scale multifamily space. And so, being able to provide a passive investing opportunity in the Midwest with a quality operator that’s in their backyard was appealing to a lot of my investor network. And it was a period of over roughly 18 months where we really explored this with our investor network, realized that there was an appetite for it, and then we started to get involved in that space.

We’ve now acquired roughly $175 million of large commercial multifamily outside of Utah with really impressive partners in those local markets – When you’re acquiring those assets, what do you tend to look for? What’s your overall strategy?

Obviously, the markets, but in terms of the assets themselves, are you looking for value-add, or are there, you know, are they class A, class B? What’s your general approach there?

Scott: Yeah. Initially, it was I looking for a blend of both cash flow and appreciation. cash flow out the gate with some upside through value-add forced appreciation. And so, I was looking for operators that were in the Midwest that specialized in that space that… And to go back to your question, what are we looking for?

For me and for my investors, the number one priority is the operator that we’re working with. And so, for me, I wanted to be able to provide a variety of investment opportunities for members of my investor network and help them diversify across operator, which is the number one most important piece of that puzzle for us, because I truly believe being a broker in my local market, I find it hard to believe that someone from outside of my market is going to have a competitive advantage over me in my local market and my expertise in this space.

David: And so, I believe having a boots-on-the-ground operator who’s in the backyard of where we’re investing is critical. So, I wanted to be able to help my investors diversify across operator, across geographic location, across property class, and across business plan. And so, when I look at that, I say we started out with C, C+ value-add opportunities with a local operator in the Midwest.

And so, we partnered up with a great operator in Kansas City, Missouri, and we acquired a 64-unit department building, and the appetite for my investor network was very high for that type of deal. And then we also acquired a 72-unit in Cleveland, Ohio, which was a C-class value-add deal, right?

Scott: Mm-hmm.

David: And then we partnered with a great operator in the Houston market where we acquired a B-class value-add deal. And so, there’s pros and cons to each of these markets, but above all of that, I truly believe that there’s opportunity to be found in any market if you know where to look. And that comes down to local expertise with operators that are entrenched in that local market that have the relationships with the brokers and have intimate market knowledge that’s going to give us a competitive advantage in their particular market.

Scott: I guess, because there’s so many different operators, what kinds of things are you looking for, you know, when you, when you do force those partnerships and you find them? What are they doing, I guess, right?

David: Yeah. So, there’s a few criteria that I set out and we have for ourselves. So, there’s some high-level criteria and then there’s some of the nuanced criteria. So, we’ll start at the high level. First and foremost is being exposed to a lot of different operators. The luxury of having a podcast where you get to interview a lot of impressive people and incredible people is you get to, you know, firsthand, you get to spend a half-hour or 45 minutes, sometimes an hour with a potential guest, right?

And so, by having “The Lead Sponsor” podcast, it’s given me opportunity to network with a lot of sponsors. We’re roughly 200 episodes in at this point. So, that alone gives me exposure to a lot of people. But what I was personally looking for in a sponsor was, number one, they had to have a track record of success. So, I wasn’t interested in partnering with someone who it was their first deal, right?

I was looking for someone who we had set a boundary, and these weren’t hard fast, but we were typically looking for someone who had acquired at least 1,000 units. Okay? But not only that. So, that was number one criteria, a track record of success. I also wanted them to be on a growth trajectory.

What I mean by that is that I didn’t necessarily want to be partnering with a sponsor who had been in the business for the last 15 years, had acquired 5,000 units, and was sort of sitting back and enjoying what they had already built.

Scott: Right. Putting their feet up.

David: I wanted a sponsor who was aggressive and hungry to do more deals, right? Because, otherwise, I couldn’t really help my investor network get involved in opportunities. So, first was a track record of success. The second was a growth trajectory. Third was values aligned. That’s very hard to articulate, what that means. But I have some innate values and how I want to treat my investors that just takes time in getting to know somebody before I will be able to determine if they’re going to treat my investors or handle certain situations in the same way.

So, those are the three high-level, you know, track record of success, growth trajectory, and values aligned. And then, of course, local expertise. I wanted them to be in the market that we were investing in and have local expertise. So, those were the high-level pieces.

And then it’s a matter of time. That’s the biggest challenge when you’re searching for an operator, is it takes time to actually get to know people. And so, the individuals that I’ve partnered with, I’ve generally had a relationship with for at least a year prior to partnering with them on an opportunity. And over that period of time, multiple interactions, that’s when you really get to know somebody and if you really truly are values-aligned.

Scott: Absolutely. And I think that’s just fantastic, really, perspective to have when we’re talking about this, because I always say, you know, you want to have those conversations. You know, if you’re talking to a sponsor, you want to be able to ask questions, get that information about their track record. You want to know how the communication’s going to go throughout the life of the deal.

You know, are you going to get those updates? Are you going to be able to call somebody on the phone and say, “What’s happening here?” You know, and whether it’s good news or maybe not so good news because of challenges that come up, you want to be able to really be able to communicate and have those open candid conversations, right?

David: Absolutely. Yeah. And I think, you know, that was one of the, you know, advantages for my investor network is like, you know, the amount of time and effort that I put in to vetting and getting to know sponsors that I would want to partner with is daunting to say the least. So, being a passive investor, without being able to have that same level of time and dedication to being able to find and vet sponsors is, you know, that’s a tough challenge, right?

So, I really see that as an opportunity for me to provide a lot of value to my personal investor network, is by putting in the time and the due diligence to really get to know a sponsor, understand their track record, understand sort of their mind about investing, what their expertise is, where their limitations might be, and where there might be a little bit more risk with that particular operator versus another, and then being able to do some high-level due diligence prior to putting a deal out in front of my investor network so they know it’s gone through a couple of levels of due diligence before it actually gets put in front of them.

Scott: Right. Absolutely. I want to shift gears a bit here and kind of take a look at the landscape. You know, right now we’re in this sort of inflationary landscape, we’ve got interest rates rising, a lot of folks, you know, whether it’s active and certainly on the passive investing side, they’re looking at multifamily and there’s a lot of questions, you know, how is this impacting things?

So, what have you seen across your properties and maybe in Utah, specifically, the impact there, whether it’s rent increases, whether it’s challenges with materials when we’re talking about renovations, I’m just curious to, overall, what you’re seeing.

David: Well in speaking to our special niche, which is the, you know, the small-scale multifamily, we’re not necessarily dealing with large value-add commercial projects, right? Usually, what we’re helping our clients buy here locally is, you know, stabilized assets that are performing well, that maybe they’re having to go in and do some improvement to the property, but, generally, these are stabilized assets that are already performing, right?

So, what I’m seeing is that there is a gap between the price, the medium price for a mortgage payment for the average homeowner right now versus where our rents are. And there’s a few charts that are being floated around there in the industry right now that’s showing this gap and how far it started to widen.

And so, that just shows me that particular space or that particular graph helped me to understand that, “Hey, there is room for this to continue to grow, especially here in Utah.” So, from a rent perspective, I expect the rents continue to climb. The reality is if you go back to, you know, the recession of 2008, 2009, I was in the space.

I was mainly on the residential side of the business, but I had people all around me that were losing their shirts in the residential space. What I realized is…I’ve done some research, is when you go back and you look, property values dropped dramatically across the board, all aspects of real estate, whether that be industrial, whether that be commercial, whether that be residential, values drop dramatically, right?

But when you look at the rent rates during the recession, it actually didn’t drop that much. It was about roughly 6% to 7% across the board for commercial multi-family real estate. So, when I look at that, I say, “You know, this is a recession resilient asset class.” That as long as you’re taking a conservative approach and you have a reasonable amount of debt on the property, you’re not over-leveraged and you’re buying caps on your rates, as long as you are in a place where, you know having, you know, 6% to 7%, maybe close to 10% in vacancy isn’t going to sink the ship, then you write it out.

And that’s what I love about multifamily, is that the vast majority of my investors, especially here locally, there’s not that much concern. In fact, it’s a great opportunity, right?

Scott: Right. It’s the ebb and flow, and they’re saying, “well, I’m buying hold” or whatever it might be, right?

David: Yeah. And my investors are guys that are buying property with a 10-year mindset, you know? So, it’s really no concern. Rents might drop. It depends on the location and the asset class, but across the board, generally speaking, this is a very recession-resilient asset. And most of my investors are putting a reasonable amount of equity into their deals upfront.

And so, they have a comfortable amount of debt. And regardless of what happens with values, they just plan on writing it out. And we all know that, you know, in 5 to 10 years, regardless of what happens in the short-term, that these properties are going to be great properties for them.

Scott: Absolutely. You were talking a bit about just the general differences when we’re talking small-scale versus large scale. You know, smaller-scale, the cash flows might be a little different in a high-growth market like Utah, versus what, you know, some other larger scale outside of Utah you might see. When we’re talking about cap rates, could you speak a bit to… Are there differences, really, when we’re talking a smaller-scale multifamily property versus, you know, larger scales that maybe a passive investor’s more used to, and what those differences might be?

David: Yeah. From a cap rate perspective, the challenge is, and there’s two conversations that go on here, it’s the small commercial multifamily and then there’s the residential multi-family. You know, two to four units from a lending perspective is still considered residential, and you can get residential financing on those.

And so, those trade less on cap rate and more on comparables, right?

Scott: Mm.

David: So, the lenders are going to underwrite the individual more than they are going to underwrite the asset itself from a performance standpoint. So, there’s really not a cap rate analysis that’s going on in that two-unit to four-unit space. But when you get into the small commercial, yeah, you know, you’re definitely looking at the asset itself versus the individual. And when you’re looking at cap rates, everything is compressed, right?

Scott: Yup.

David: But if you’re buying a residential, you know, a duplex or a fourplex right now, just to put the, you know… I know most of your investors are investing in large commercial multifamily, but to give some context, if you’re buying a duplex or a fourplex in Utah and Utah valley right now, you know, it’s not unheard of to be, you know, buying something at a three-cap.

The reality is, like, that’s not exciting from a cash flow perspective, right?

Scott: Right.

David: And you’re having to put, in most cases, 25% down minimum [inaudible 00:27:57] breakeven on these opportunities. It’s usually, you know, 30% to 40% down to even break even. So, what I would say is that in the small multifamily space, cash flow is super lean, cap rates are really low, but you have to have a long-term perspective if you’re investing in Utah.

The other opportunity in small-scale multifamily is buying something that there is a value-add opportunity. Yeah, you may be going in at a three-and-a-half cap, is there an opportunity to improve upon that? From a market perspective or from a value-add perspective. And a lot of investors, not necessarily our investors are playing that game, right?

They’re going in with, “Hey, I’m not necessarily concerned about how it’s performing today. I want to take it to a whole another level.” And there’s great opportunity for that in Utah right now.

Scott: Right. Right. And have you seen… Is the playbook very similar to, you know, a value-add opportunity with a larger building, and really, we’re just talking about scale differences?

David: Yeah. It is very similar. I think there’s more risk on the smaller side. You know, when you have more scale, when you have more units, when you’re dealing with 100-unit building where you can really systematize and you have a budget to maybe that budget can help you, you know, if you run into some snags along the way that budget’s going to be able to… You have some more maneuverability inside of that budget on 100-unit to 300-unit apartment building versus, you know, a twelveplex where the budget has got to be dialed in, you’re probably dealing with someone who’s more experienced in that rehab and renovation space and knows exactly what they’ve done.

What I’ve noticed in our market is those guys that are playing in the small-scale commercial multifamily are guys that have come from the fix and flip space. They know exactly what their costs are, they have relationships with contractors, they know exactly what’s going to need to go into an apartment building to get it to perform at another level and they have all the pieces that they can tap into to make that project a success. Where I have seen some others get caught is thinking that they can go into small-scale and they make a couple of mistakes along the way, and it can kill the whole deal because there’s just not enough room for error.

Scott: Right. Right. And I think that’s an interesting point, really, when you’re talking about that smaller-scale, that there is, it’s just a little thinner, right?

David: Yeah. I also think that the opportunities are greater because a lot of these are just joint venture deals, right. They’re not syndicating these deals. They don’t have passive investors that need to be paid a preferred return. These are guys that are going in, generally speaking, they’re partnering, they’re bringing, you know, a combined resources of maybe a group of three or four, maybe five individuals, and going and taking down a smaller project, but they have a bigger piece of the pie.

And so, the opportunity can often be bigger for those guys that are willing to take on that risk and take on those type of projects.

Scott: Absolutely. Shifting gears as we sort of wind down our discussion, always like to look to the future. And a lot of people are looking on the horizon, maybe there’s some concerns of, “okay, well, is the, is the housing market, are things going to go south? You know, where are we at here?” I’m curious, what are you seeing when you look at Utah, specifically, and then what are you also seeing when you look sort of at the larger nation, and when we’re talking about multifamily, what might the future hold?

David: Well, I’m not an economist, but I also read and listen to a lot of smart people. The reality is even amongst those very, very smart people that spend their entire career studying this type of stuff, there’s a lot of differing opinions about how this is going to play out. What I settle in on is the fact that if you’re buying multifamily property with a long-term mindset, getting a conservative amount of debt on a property, then you’re likely going to be just fine.

And buying caps on any rates or getting fixed-rate long-term debt. As long as you’re taking that approach, then I think everything’s going to be just fine. It’ll work itself out. In fact, I think there’s some benefit to those that play that game during a recession, because there’s opportunity.

Where I think people will get caught is those that are doing, you know, deep value-add projects and with an unknown debt, you know, market at this point in time, who knows what’s going to happen? You know, they talk about raising rates yet again, a couple of different hikes over the next 6 to 12 months.

I hear a lot of individuals in the space say, “Well, they may be able to get one more rate hike in before they have to come back down.” So, we’ll see what happens. So, I guess what I would say is I’m a pretty simple-minded guy and I take a very simple-minded approach, which is invest in an asset class that has been historically recession resilient, get conservative debt on a property.

If you are getting variable rate debt, by caps so that you don’t get yourself into a bad spot. And then write it out. The market’s going to adjust. And be ready to take advantage of opportunities as the market does adjust, but for any property that you have currently acquired, treat it well and take that conservative approach.

And multifamily is going to do just fine moving forward.

Scott: Absolutely. Absolutely. It is so resilient. And having that approach, I think, is the right one. And then when we’re talking about Utah specifically, what’s next for Utah? I mean, it’s a high-growth market. You know, do you think if that’s just going to continue and Utah is going to continue to draw that that population, that interest, that job growth?

David: Yeah. you know, there’s no indication that things are going to slow down here. The reality is there is still room for rent growth. And so, I suspect in the short-term that that will continue to be the case. May eventually catch up. I do think, from a residential standpoint, things are going to slow down. I don’t foresee my personal opinions.

I don’t foresee any type of massive correction on the residential front, which often, it will impact commercial multifamily in a positive way if there is a significant correction because you have these… You have a scenario where if people get pushed out of the buying market, which is already starting to happen with rates, increasing-price is being where they’re at, well, these people become renters, right?

And so, if you own multifamily, whether that be A-class, B-class, or C-class, I think you’re in a good position. And I think that there’s natural rent growth that’s going to continue to occur over the next 18 months, 24 months. Eventually, it’ll tap out, but for the time being, things are moving forward in the right direction. And, again, take a very conservative approach.

We’re in unpredictable times at this point, but, you know, that conservative approach saves all – I think so. And I like your point there too. I mean, some people, they’re, you know, worried about interest rates and things of that nature when we’re talking about debt, but, you know, it’s not great, but for first-time home buyers, it’s getting tougher, and tougher and those folks need homes and they need to live somewhere.

And so, if they can’t buy, you know, they’re going to have to rent at least for a time. It might take them a bit longer to make that first purchase. And I think that’s where multifamily can really fulfill a need, right?

Scott: Yeah. Well, and you know, sometimes I’ll have conversations with investors and I’ll walk them through the return profile of a small-scale multifamily or what it might look like to invest passively in one of our larger commercial projects. And sometimes they’ll just, you know, sort of, you know, comment that it’s really low or lower than what they had, you know, would want to see.

And the question that you got to ask yourself at this point in time is where would you put your money? Right? Where else are you going to put it right now? And if you want a safe haven for capital, well, commercial multifamily is probably a great place for that money to find a home.

David: I could not agree more. David, thank you so much for joining me on the show today, sharing so many great perspectives, and insights, and thoughts, whether we’re talking small-scale or larger scale, and certainly talking about Utah as well. And if folks want to find out more, maybe connect with you, listen to your podcast, where can they do that?

Where should they go?

David: The easiest place is probably just our website,, Or you can check out the podcast at “The Lead Sponsor” podcast.

Scott: Fantastic. And we’ll, of course, have links to all of that in our show notes. Thank you again, David.

David: Thanks, Scott. Appreciate it.