The Multifamily Investor Expo 2023, a premier event dedicated to exploring avenues for wealth creation within the real estate sector, recently hosted a pivotal panel discussion titled "Wealth Development Strategies with Multifamily." The session brought together four leading experts to dissect the multifaceted approach to building and preserving wealth through multifamily investments. Moderated by Andy Hagans of AltsDb and WealthChannel, the distinguished panel featured Ashley Tison, founder and CEO of OZPros; DJ Van Keuren, co-managing member of Evergreen Property Partners and founder of the Family Office Real Estate Institute; and James Hance, founder of Green Bison Capital. Their collective insights provided a comprehensive overview of why multifamily real estate continues to be a cornerstone for sophisticated investors.
The discussion, available for viewing on YouTube, delved into the core tenets that make multifamily properties an attractive asset class for long-term wealth development. Panelists highlighted not only the intrinsic value and stability of residential real estate but also the strategic advantages it offers in terms of cash flow, operational control, and significant tax efficiencies. The expo itself, a recurring event that draws a diverse array of investors, asset managers, and industry professionals, serves as a crucial platform for disseminating knowledge and fostering connections within the alternative investment landscape. This year’s focus on multifamily underscored its enduring appeal, especially in an economic climate marked by evolving interest rates and market dynamics.
The Enduring Appeal of Multifamily Real Estate
The fundamental question driving the panel was the enduring rationale behind multifamily’s prominence in wealth development strategies. James Hance of Green Bison Capital initiated the conversation by emphasizing the inherent stability of multifamily properties. "It’s the intrinsic value of a building, and it’s where people have to live," Hance stated, underscoring the non-discretionary nature of housing. He elaborated on the stability derived from multiple units, contrasting it with the volatility of single-family rentals. The consistent cash flow generated by multifamily assets, coupled with the ability to "drive that value and force appreciation through good operations," was presented as a key differentiator.
Hance also highlighted the significant tax advantages. "The tax efficiency is there as a direct investor. As opposed to owning a paper asset, you can really take great advantage of what real estate provides, which is depreciation," he explained. This allows investors, even as limited partners, to offset tax liabilities through depreciation, effectively creating a deferred tax strategy. The value-add component, where operational improvements can directly increase income and decrease expenses, further enhances the appeal. This multi-pronged approach—income generation, appreciation potential, capital preservation, tax benefits, and understandability—positions multifamily as a robust investment vehicle.
Family Office Perspectives on Multifamily
DJ Van Keuren, whose work with the Family Office Real Estate Institute provides him with unique insights into the investment strategies of ultra-high-net-worth individuals and family offices, confirmed the consistent dominance of multifamily in these portfolios. "Multifamily has continued to be the main property type for families to invest into," Van Keuren reported, citing findings from their annual family office real estate investment study. He echoed Hance’s points about understandability and risk mitigation, noting that the impact of a single tenant vacancy is far less significant in a multifamily building with numerous units compared to, for instance, an office building.
Van Keuren also touched upon macro-economic trends that bolster multifamily demand. "With the way that student loans have been so expensive… and homes have really gone up in price over the years. And so, the easiest way for that shelter is to rent," he observed. This demographic shift, coupled with migration to areas offering affordability and job growth, directly fuels demand for apartment rentals. The resilience of multifamily during economic downturns, a phenomenon supported by historical data, further solidifies its role in capital preservation for generational wealth.
Scaling Wealth Through Opportunity Zones and Tax Advantages
Ashley Tison of OZPros brought to light the strategic integration of multifamily investments within tax-advantaged structures, particularly Opportunity Zones (OZs). Tison highlighted the scalability of multifamily, allowing for the efficient consolidation of a large number of residents within a concentrated area. This, he argued, is not only a practical investment strategy but also an environmentally conscious one, reducing urban sprawl and minimizing infrastructure needs. "It’s an ability for us to be able to consolidate the amount of sprawl that’s happening," Tison noted, connecting it to sustainable urban development principles.
The Opportunity Zone program, Tison explained, offers a powerful wrapper for multifamily investments. It allows investors to defer capital gains taxes, potentially eliminate depreciation recapture upon sale, and even achieve tax-free growth on subsequent investments. "The fourth benefit of, you know, the opportunity zone program is that it eliminates depreciation recapture," Tison stated. This can translate to a significant increase in Internal Rate of Return (IRR), often around 3%, which is substantial when compared to the sometimes-thin margins of real estate deals in recent years. For investors facing substantial capital gains, OZs provide a compelling mechanism to redeploy capital into income-generating assets like multifamily while deferring immediate tax liabilities.
Navigating Tax Wrappers: 1031 Exchanges, DSTs, and Beyond
Beyond Opportunity Zones, the panel explored other crucial tax-advantaged strategies integral to multifamily investing. DJ Van Keuren emphasized the widespread underutilization of the 1031 exchange, a provision allowing investors to defer capital gains taxes by reinvesting proceeds from a sale into a like-kind property. "80% of families don’t use 1031 exchanges, which is pretty astonishing to me," Van Keuren remarked, attributing this to a lack of education. He underscored its power for compounding gains over time, transforming a 15% return into a significantly higher figure through tax deferral.
Van Keuren also mentioned other avenues like Low-Income Housing Tax Credits and New Market Tax Credits, as well as the nascent market for carbon credits, though he reiterated the 1031 exchange as a primary tool for investors. James Hance corroborated the significant capital inflow into syndications from 1031 exchanges, noting that approximately 20% of capital raised by his group came through this channel. He highlighted the potential for passive investors to utilize 1031 exchanges to transition from active property management to a more passive role in syndication deals, often with immediate cash flow and a step-up in basis.
Ashley Tison added a critical nuance regarding the 1031 exchange, particularly for investors with substantial estates. He cautioned that with the potential reduction of the lifetime estate tax exemption after 2025, large estates might face significant estate taxes on the stepped-up basis of 1031-exchanged assets. In contrast, he noted, Opportunity Zone investments freeze the value of the contributed capital for estate tax purposes, offering a different planning advantage. This sophisticated tax planning element underscores the necessity of expert consultation for high-net-worth investors.
Market Conditions in 2023: Opportunity Amidst Higher Interest Rates
A central theme for investors in 2023 has been the impact of higher interest rates on real estate markets. Andy Hagans posed the critical question: is now a good time to invest, or should investors hold cash? James Hance acknowledged that "the days of cap rate compression are over," emphasizing the need for investors to be "particularly astute" in their sponsor selection. He pointed to an increase in distressed properties, often stemming from an inability to refinance maturing debt, creating opportunities for well-capitalized buyers. "This will be a year, I think, for opportunities, particularly with debt and things that are… Properties that are under distress," Hance stated.
DJ Van Keuren observed that many family offices, having learned from past cycles, are strategically deploying "dry powder" rather than waiting for the market to fully recover. He stressed the importance of fundamental analysis—cost of living, quality of life, and demand—as these factors enable profitable investments in any market. However, he also warned of a "reckoning" for less competent operators, predicting that the current environment will separate strong sponsors from weaker ones. The potential for negative leverage and the impact of floating-rate debt were cited as key risks requiring thorough underwriting.
Ashley Tison offered an optimistic perspective, viewing current market conditions as a catalyst for opportunity. He highlighted the "value add play" as still prevalent, particularly in Opportunity Zones where growth is anticipated. The inherent demand for housing, coupled with the potential for development in underserved areas, provides a buffer against market downturns. Tison also pointed out that investors within OZs often have a defined timeline for deployment, which can drive proactive decision-making.
Lessons from Family Offices for Generational Wealth
The panel concluded with a discussion on what independent high-net-worth investors can learn from family offices regarding generational wealth management. DJ Van Keuren identified patience and sound decision-making as paramount. He emphasized that while wealth creation is one skill, its preservation and growth across generations require a different mindset. The illiquid nature of real estate necessitates a long-term perspective, and finding trusted partners—sponsors and advisors—is crucial. Van Keuren also advocated for rigorous stress-testing of investment assumptions, preparing for scenarios beyond optimistic projections.
Ashley Tison shared an anecdote illustrating the pitfalls of poor financial planning post-liquidity events. He recounted a client who, after a substantial capital gain, invested in the stock market instead of adhering to the intended strategy for a fund. This led to potential tax liabilities and a complex decision-making process. Tison stressed the importance of education and surrounding oneself with qualified professionals to avoid such missteps, extending this advice to the younger generations of families to ensure wealth continuity.
Andy Hagans summarized these insights by underscoring the humility required for effective wealth management. He noted that successful individuals recognize their limitations and actively seek out and partner with experts. The ability to build a team of trusted advisors—whether for legal, tax, or investment guidance—and to collaborate with experienced operators who have navigated multiple market cycles, is a hallmark of enduring wealth. The establishment of family core values and a clear mission statement, as suggested by Tison, can provide a foundational framework for intergenerational wealth transfer, guiding investment decisions and fostering a legacy of prudent financial stewardship. The panel’s overarching message was clear: multifamily real estate, when approached with strategic planning, expert counsel, and a long-term perspective, remains an unparalleled vehicle for developing and preserving substantial wealth.
