200 – Commercial Real Estate and Macroeconomic Trends with Mo Bina

Synopsis

Mo runs a company called High-Rise Capital. They invest in commercial real estate assets such as multi-family homes, senior living homes, self-storage units, mobile homes, and industrial assets. Today, Mo gives us a look at investing in commercial real estate and at the same time being mindful of macroeconomic trends.

Key points

From Wall Street To Main Street

Mo is familiar with the volatility of the stock market, having seen his portfolio drop during the 2008 financial crisis. After spending a number of years investing in paper assets, he started looking for alternative investments outside of stocks and bonds.

After listening to a show called The Real Estate Guys, where the hosts talked about the risks involved in the financial markets and the benefits of investing in real estate, Mo decided to switch to investing in real estate and became a passive syndicator.

Mainstream Investing

Mo believes that we can all invest and benefit from each other instead of putting our money in volatile paper assets. While he did dabble a bit in out of state single-family homes, he found them to have a scalability issue. He quickly realized that investing in single-family homes seems to require too much effort on his part.

So he decided to become a passive syndicator, built a network, and later on founded High-Rise Capital. With his company, he has invested in ground-up and value-add investments.

Challenges In The Industry

Communication, for Mo,  is important. Sometimes he sees that not everyone gives full transparency or provides all the documentation that will let him vet the offer from the start.

Even as a passive investor, he wants to be involved and know how the deals are performing. This is why he looks for those who can make all documentation readily available, gives monthly updates, which can make the investors more comfortable.

The Importance Of Education

For those considering real estate investing, understand first what you’re trying to do and what you want to achieve. It is up to each investor to educate themselves through the resources available as investing is very individualistic.

Your strategy will be determined both by where you have been and what you are trying to establish.

Switching From Passive To Active Investing

After educating himself in all aspects related to real estate, Mo began to develop a passion for the industry which then led to the start of his company.

He wrote his e-book to share his experiences since he often had a lot of people asking him the same questions over and over again. He thought about all the things he learned from when he started and put it all together in his e-book.

The Golden Nuggets On His eBook

Mo’s ebook got a lot of attention for its discussion on macroeconomic trends and conditions including fiscal policy, corporate debt, etc. He believes that those are important to understand because you are getting involved in assets you would be holding for 5 or more years. So it’s key to understand long-term market trends when investing in real estate.

Every investor should understand the long term benefits of real estate and know the assets that are volatile and illiquid. One example is real estate gives a hedge against inflation. Also, when paying 30-year mortgages, you are actually making depreciated payments through the years.

The Impact Of COVID-19

With the pandemic, Mo sees that it accelerated the changes that are already happening before. We’re seeing the decline of retail with the rise of e-commerce. Also, the need for office spaces will continue to diminish as people switch to a co-working environment or as we see more employees working from home, either on a full-time or part-time basis.

Gyms or common areas in multifamily assets have been closed. This presents the question of whether property developers will still build those common areas in future developments. On the other side, the industrial asset classes boomed as e-commerce became more common. We now see more warehouses, storage houses, and logistical places.

Before COVID-19, there was already an exodus of workers who left cities like California, New York, and Illinois due to high taxes and high costs of living. Most have moved to the southwest and southeast areas such as Texas, Arizona, and Florida.

It seems people moved from urban areas to the suburbs. And we see as well that offices are rising in the suburbs with smaller footprints.

A Look At The Market For Different Asset Classes

Home-ownership has been in a decline for years. Mo sees that multi-family properties will be in demand for many many years to come.

Self-storage units typically do well during a recession. For mobile home parks, the supply has been decreasing year after year.

The demographics of those who go to senior living are highly attractive because there is continuing demand and is a need-based asset class. Because COVID-19 may affect this asset class, its design might change in the next few years.

Tips For Getting Into Real Estate

Relationships are key to be successful in the industry. So investors should be building relationships as they go.

Most people in real estate get into value-add opportunities. But Mo believes there are still opportunities in other markets for doing developments. In fact, in some areas, it’s cheaper to build a multi-family then look for a value-add opportunity. So investors can opt to pursue development and add to the supply.

Every market has a submarket. Experts in those markets come from years and years of building relationships. No one is an expert in all markets.

You need relationships and education to be able to understand the planning commission, city residences, etc. This takes years to develop and comes from finding good reputable developers and sponsors.

So take the time to fully understand what you want and what you want to do, so you can cover all your bases.

References

More from our guest

• For more resources, you can get Mo’s eBook and subscribe to their monthly newsletter through his website: High-Rise Capital
• You can also contact Mo at info@high-risecapital.com