Taylor takes a deep dive into the current state of the real estate market with Cody Laughlin, one of three managing partners at Blue Oak Capital. With many multi-family operators struggling to see outsized increases in rent growth and occupancies, there's no denying a downturn in progress. However, Cody shares his experience underwriting and operating real estate deals during downturns, emphasizing the importance of running numbers on real estate deals during a downturn and adapting business models to make it through these challenging times. Real estate investing has become mainstream, leading to many new investors coming into the space. However, with competition fueling accelerated asset values, there is now a downturn in progress with softening occupancies, rent premiums, and delinquencies. Despite this, Cody believes there will still be opportunities for those who are prudent in their analysis and assumptions.

This episode gives valuable insights into navigating the current state of the real estate market while positioning oneself well for future cycles. Tune in now!

[00:01 - 06:08] Opening Segment

• Cody Laughlin shares his underwriting and operating strategies for real estate deals during a downturn
• Blue Oak Capital acquires and operates multi-family acquisitions
• Accidental landlord experience led to discovering the benefits of real estate investing
• Underwriting and operating deals during downturns are important regardless of whether or not we're currently in one.

[06:09 - 14:08] Real Estate Investing Goes Mainstream

• A vast number of new investors entering the space has fueled competition and accelerated asset values
• Softening in occupancies, rent premiums, and increases in delinquencies indicate a downturn in the market
• The year of the operator - operations are the most vital variable to focus on this year

[14:09 - 19:07] Adopting Conservative Underwriting Strategies During Downturns

• Underwriting is the process of running the numbers for a property
• Conservative underwriting is crucial in the current environment to mitigate downside risk
• Debt is the most significant limiting variable in underwriting leverage
• Occupancies and rent growth are trending back down to pre-pandemic levels, so conservative assumptions are necessary

[19:08 - 25:55] Retaining Tenants and Cutting Expenses During Market Downturns

• Focus on retention to keep costs down
• Mitigate expenses by cutting unnecessary expenditures
• Uncertain rules from the Fed are causing unpredictability in the market
• Relief may come in Q2 with a pause on interest rate hikes

[25:56 - 29:59] Closing Segment

• Best investment: spending $4,000 on a mattress firm
• Worst investment: franchise licensure with a fitness company
• The most important lesson learned: not being afraid to fail forward

Quotes:

"Focusing on resident retention and customer service is absolutely crucial right now." - Cody Laughlin

"Now's the time to really be conservative in your underwriting and make sure that you're building in layers of protection to mitigate your downside risk." - Cody Laughlin

"Never be afraid to fail forward. Don't be afraid to make mistakes and don't be afraid to fail because every failure is a learning opportunity." - Cody Laughlin

Connect with Cody!

Free coaching call: 832-7431400

Invest passively in multiple commercial real estate assets such as apartments, self-storage, medical facilities, hotels, and more through https://www.passivewealthstrategy.com/crowdstreet/

Track your rental property's finances with Stessa. Go to www.escapingwallstreet.com.

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