- January 30, 2017
Although Wilson started with residential 1-4 properties and still owns many, he has always liked multifamily properties too, since they can provide higher cash flow due to higher rent ratios. They do, however, require much more careful selection, more due diligence, and excellent property management. There are many more "moving parts" with a multifamily property than with houses. Wilson prefers properties that are large enough to afford full time on site management to provide better control (unlike houses, all of the tenants are close neighbors), and full time maintenance for economy of scale efficiency. The importance of high quality property management cannot be overstated since this can often make or break performance.
One common sense piece of advice that Wilson offers to those interested in multifamily properties if you are doing it on your own is this: visit the property day and night, unannounced, and spend some time observing it. Wilson urges you not to believe broker proformas or internet statistics since there can be significant variances with your prospective property and submarket from the regional demographics. One big advantage about investing with a company like Wilson's is that they only offer properties that have been thoroughly researched and meet their stringent standards of quality.
In this tight residential market, Wilson has been diversifying and focusing more on commercial properties and syndications because the returns currently are better. One should be flexible in investing and be willing to change course with the market. Right now, there are simply too many buyers chasing too few residential and multifamily deals. He still likes houses and recommends everyone have some in their portfolio because they provide more liquidity and generally appreciate more, however, good ones are currently difficult to find.
When it comes to commercial properties, Wilson has his reasons for favoring them in this market over multifamily. He points out that true commercial is a different asset class than multifamily. Commercial includes properties such as retail, office space, industrial, self-storage, or medical centers and have a separate class of lenders. While such properties certainly come with risks, the amount of benefits should be carefully considered. First of all, commercial properties come with less headaches - these properties tend to be easier to manage than scattered residential properties because of the higher credit and quality of the tenants, the longer leases with scheduled increases, and because of the triple net (NNN) leases which pass the taxes, insurance, and maintenance costs on to the tenants. This results in more predictable future expenses which in turn result in more predictable returns.
With retail and industrial properties, Wilson likes businesses that mostly provide local services because it makes them less venerable to internet sellers, which in turn make the business more stable. The owner of a business that provides a local service, such as a hair salon, will be more motivated to maintain his / her livelihood and the internet can't style hair. He also likes path of progress communities that are within major economic centers or MSAs (metropolitan statistical areas).
The final item in Wilson's preferred deals are syndications. Simply defined, a syndication is a collection of people pooling money for a common goal. If this sounds familiar it is because this was crowdfunding long before this was a popular word in the investment world. A good syndicator will seek out a deal, and then a group of people will each invest a certain amount of money into the property (Wilson usually asks for $50,000 per share). One of the benefits is that investors gain access to a much higher level and quality of product than they could on their own and they can spread their risks by distributing their investment capital into may properties.
A good syndicator has access to hundreds of deals from which to select the diamonds and negotiate the best deals. They have the experience and expertise to do a high level of due diligence, and qualify for and secure the best loans. They will also have an end of project financial incentive to provide the best management of the property and syndication. The key is to find the best syndicators. Ones with the highest integrity and experience, small enough to care about the individual investor, and experienced enough to find and manage the best deals. Unquestionably, Wilson Investment Properties, Inc. strives to provide this level of excellence.