A Sponsors Approach To Picking Markets & Underwriting Deals That Limited Partners Should Understand With Joe Ollis Passive Real Estate Strategies

How do you gain insights on strategies and metrics in Real Estate investing? In this episode, Joe Ollis dives into their approach to real estate investing. The Peak Group is a vertically integrated single-family rental platform that owns and operates around 2000 homes across the south of the United States. Joe will discuss how they use both data and boots on the ground knowledge to identify trends in markets such as Dallas, Florida, Charlotte, North Carolina, Tennessee, Georgia, and Alabama. He'll also explain how 65% of their portfolio is currently cash flow positive. Additionally, explore how competition for certain asset classes has driven up prices over the past several months and hear strategies for investing in secondary or tertiary markets where there is less institutional competition. Learn how rising mortgage rates affect home buyers and institutional groups, as well as their strategies for navigating the current market and underwriting properties. Get advice on how to plan for and account for property taxes when underwriting too! Tune in now to get a glimpse into the world of real estate investing through the lens of Joe Olis from the Peak Group!




Key Highlights:


[00:00 - 05:52] Understand Your Sponsor's Market and Underwriting Strategies 
• The Peak Group is a vertically integrated single family rental platform, with a privately traded REIT owning and operating approximately 2000 homes across the US
• Joe's role is to act as a fiduciary to take care of investors' best interests, helping them choose the right strategy for investing in single family rental products
• Joe uses data to identify simple trends and boots on the ground knowledge to identify where to build new product
• 65% of their portfolio is currently in Dallas, with other markets spread through Georgia


[05:53 - 11:43] Competition in Real Estate Market Causes Investors to Re-Evaluate Investment Strategies
• The market has significantly shifted in the last three months
• Competition is high in many markets, making it difficult to compete
• Investors should look into secondary or tertiary markets for higher yields and less cap rate compression
• In early January 2022, rent growth of 9-10% was needed to make a 4.5 cap purchase
• Since January 2022, no purchases have been made due to pricing getting out of whack
• Sellers are not motivated to sell due to lack of efficient capital deployment options
• Fewer buyers on the market leads to lower sales prices


[11:44 - 17:46] Property Taxes Bite Hard: How Investors Can Plan for the Unexpected
• Mortgage rates have increased from 4% to 8%, impacting home buyers and institutional groups
• Investors are able to find good deals in the market by purchasing all cash and refinancing when interest rates lower
• Underwriting boils down to cash yield and undeployed equity, with the biggest lever being the cost of debt
• Property taxes are the number one thing that can screw up a pro forma long term, especially in Texas where they increased 23%
• Investors should be pessimistic when underwriting expenses for property taxes




Key Quotes:


"I think the market has significantly shifted even in the last three months, and we should totally talk about that." - Joe Ollis


“If you're sitting on cash right now and you have the ability to go deploy it, you can find some good deals in the marketplace.” - Joe Ollis






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