The Multifamily Investor Expo 2023, a prominent event in the alternative investment landscape, recently hosted a pivotal panel discussion focused on leveraging multifamily real estate for robust wealth development. Moderated by Andy Hagans of AltsDb and WealthChannel, the session brought together distinguished experts: Ashley Tison, founder and CEO of OZPros; DJ Van Keuren, co-managing member at Evergreen Property Partners and founder of the Family Office Real Estate Institute; and James Hance, founder of Green Bison Capital. These leaders shared their insights into the enduring appeal and strategic advantages of multifamily investments, particularly for high-net-worth individuals and family offices seeking to build and preserve generational wealth.
The core of the discussion revolved around why multifamily properties continue to be a cornerstone for sophisticated investors. James Hance initiated the conversation by highlighting the intrinsic value of multifamily assets. "It’s where people have to live," Hance stated, emphasizing the fundamental demand for housing. He elaborated on the stability offered by a diversified unit base, contrasting it with the volatility of single-family rentals. The consistent cash flow potential, coupled with the ability to drive appreciation through effective property management and operational efficiencies, makes multifamily an attractive proposition. Furthermore, Hance underscored the significant tax advantages inherent in direct real estate ownership, particularly the depreciation benefits that can offset tax liabilities, positioning it as a powerful deferred tax strategy.
DJ Van Keuren echoed these sentiments, drawing upon his extensive experience with family offices, whose collective assets often run into the tens or hundreds of millions of dollars. Van Keuren’s firm conducts one of the largest family office real estate investing studies globally, and the findings consistently show multifamily as the preferred asset class. He attributed this popularity to its understandability and the inherent risk mitigation through multiple units. A single vacancy in a 100-unit building represents only a 1% occupancy loss, a stark contrast to the impact of a vacant unit in a smaller portfolio. Van Keuren also pointed to broader economic trends, such as rising home prices and the student loan crisis, which have amplified demand for rental housing. As more individuals seek affordable shelter in job-rich areas, multifamily emerges as the most accessible and logical solution.
Ashley Tison, known for his expertise in Opportunity Zones, highlighted the scalability of multifamily investments. He described how the sector allows for the consolidation of a large number of residents into concentrated areas, which he framed not as a "Soviet" concept but as an environmentally responsible approach. Tison argued that dense housing reduces urban sprawl and requires significantly less infrastructure compared to managing dispersed single-family rentals. This efficiency extends to various forms of multifamily, including mobile home parks, RV parks, and even single-family rental communities developed in a clustered fashion. His firm, OZPros, specializes in helping asset managers and high-net-worth investors establish their own Opportunity Zone funds, a strategy that can significantly enhance returns for investors looking to defer capital gains taxes.
The Enduring Appeal of Multifamily: Beyond Simple Shelter
The foundational demand for housing, particularly in an era of increasing affordability challenges and demographic shifts, positions multifamily as a resilient investment. James Hance emphasized that unlike many other asset classes, multifamily properties offer tangible, intrinsic value derived from providing a basic human necessity. This inherent demand is further amplified by demographic trends, such as millennials entering prime home-buying and renting years, and a growing preference for urban and suburban living. The stability of rental income, even in economic downturns, provides a buffer that many other investments cannot match.
The operational aspect of multifamily also presents a key differentiator. Hance noted that through strategic value-add initiatives—improving operations, increasing rental income, and reducing expenses—investors can actively force appreciation, adding another layer of return beyond passive cash flow. This hands-on potential, while often executed by professional management teams in syndications, provides a degree of control and influence over the asset’s performance that is less common in other real estate sectors.
Tax Advantages: A Powerful Wealth-Building Lever
A significant portion of the panel’s discussion centered on the tax advantages associated with multifamily investments, a critical component for high-net-worth investors focused on maximizing after-tax returns. Ashley Tison provided a detailed overview of how Opportunity Zones can dramatically enhance investment performance. By reinvesting capital gains into Qualified Opportunity Funds (QOFs), investors can defer capital gains taxes, and under certain conditions, benefit from step-up in basis and even elimination of future capital gains on the QOF investment itself. Tison cited that these benefits can often lead to an approximate 3% increase in Internal Rate of Return (IRR) for investors, a substantial uplift in a sector where returns are often highly scrutinized. He illustrated this with an example of a 3% cap rate deal becoming a 6% cap rate deal when the Opportunity Zone benefits are factored in.
DJ Van Keuren highlighted the 1031 exchange as another indispensable tool for multifamily investors. Astonishingly, his research indicates that up to 80% of families do not utilize this provision, often due to a lack of education. The 1031 exchange allows investors to defer capital gains taxes when selling one investment property and reinvesting the proceeds into a like-kind property. This deferral mechanism enables capital to compound over time, significantly boosting long-term wealth accumulation. Van Keuren also touched upon other, less common tax credits such as Low-Income Housing Tax Credits (LIHTC) and New Market Tax Credits (NMTC), as well as emerging opportunities in carbon credits, demonstrating the breadth of tax-efficient strategies available.
James Hance corroborated the widespread adoption and effectiveness of 1031 exchanges, noting that approximately 20% of the capital his firm raises comes from these exchanges. He elaborated on how 1031s can be seamlessly integrated into syndication structures, allowing investors to transition from active property management to passive investment while deferring taxes. This is particularly beneficial for individuals who have managed family-owned properties for years and seek a more hands-off approach to wealth preservation and growth.
Navigating the Current Market: Interest Rates and Opportunities in 2023
The prevailing economic climate, characterized by higher interest rates, naturally led to questions about the current investment landscape. James Hance offered a pragmatic perspective, stating that the era of aggressive cap rate compression is likely over. He stressed the importance of meticulous sponsor selection, favoring vertically integrated firms with proven track records and strong capitalization. Hance indicated that the current environment is ripe for opportunities, especially for properties facing distress due to debt challenges or operators who were not well-positioned for refinancing. "We’re already seeing it," he confirmed, referencing a property closing due to an owner’s inability to refinance maturing debt.
DJ Van Keuren observed that family offices, having learned from past market cycles, are strategically deploying capital rather than waiting for the absolute bottom. They are actively seeking opportunities presented by the current economic recalibration. While emphasizing the importance of fundamental market analysis—cost of living, quality of life, and demand drivers—Van Keuren cautioned against complete inaction. He noted that a “reckoning” is coming, and the operators who can demonstrate resilience under stress tests, such as higher vacancy rates or increased interest expenses, will be the ones to succeed. The potential for negative leverage and the impact of floating-rate debt are significant considerations that investors must now account for in their underwriting.
Ashley Tison, while maintaining his characteristic optimism, acknowledged the necessity of practical stress testing. He highlighted that investors in Opportunity Zones, due to their defined timelines, are often more motivated to deploy capital. Tison also pointed out that many Opportunity Zone projects inherently involve a value-add or ground-up development component, which provides an inherent margin of safety and upside potential, even in fluctuating market conditions. This is particularly true in high-growth areas where demand for housing continues to outpace supply.
Lessons from Family Offices: Patience, Prudence, and Planning
A significant portion of the conversation focused on the wisdom that individual high-net-worth investors can glean from the practices of family offices. DJ Van Keuren, despite acknowledging the challenges some families face in preserving wealth across generations, emphasized the core principles of successful family office investing: patience and making sound decisions. He stressed that real estate, being an illiquid asset, inherently encourages a long-term perspective. Building trust and strong relationships with reliable partners—sponsors and operators with demonstrable track records through multiple market cycles—is paramount. Van Keuren advocated for rigorous underwriting, including detailed stress tests to understand how investments perform under adverse conditions.
Ashley Tison reinforced this point by sharing an anecdote about a client who faced significant capital gains tax liabilities. The client’s initial decision to invest in the volatile stock market while waiting for Opportunity Zone deployment resulted in a capital loss, creating a complex tax situation. This underscored the critical need for expert guidance and a clear, intentional strategy. Tison also introduced the concept of establishing a "family constitution" or core value statement, extending business planning principles to family wealth management. This framework helps define family values, guide trustees, and ensure that wealth is managed and disseminated in alignment with long-term family goals, preventing the erosion of wealth across generations.
Andy Hagans concluded by emphasizing the importance of humility for investors. He noted that amassing wealth in one sector does not automatically confer expertise in another, such as real estate. The most successful investors, much like effective CEOs, surround themselves with talented professionals and partner with skilled operators. This collaborative approach, combined with a long-term vision and a commitment to education, forms the bedrock of sustainable wealth development.
The discussion at the Multifamily Investor Expo 2023 provided a comprehensive look at the enduring strengths of multifamily real estate as a wealth-building vehicle. From its fundamental demand drivers and operational efficiencies to its sophisticated tax advantages and its resilience in various economic climates, the asset class continues to offer compelling opportunities for investors seeking to grow and preserve their capital. The insights shared by Hance, Van Keuren, and Tison underscored the importance of strategic planning, expert partnerships, and a disciplined approach to navigating the complexities of the real estate investment landscape.
