Investing in Multifamily Assets during a Pandemic
Interview 10 is with Julie Anne Peterson. Julie is a Senior Director at Old Capital Lending and with her 30 years of experience in real estate, she does not just source the funds, she consults her clients to help solve their immediate needs. She works with all types of income producing real estate and at all levels of the “capital stack.” She is the host of “Zoom at 8PM EST” where she invites guests speakers, friends, investors, and deal sponsors to help educate aspiring investors.
Why did you start your real estate journey? I didn't want to pay anybody money to live and I knew that in real estate you can make a lot of money. I watched people in the space and I talked to people who were already in it so I bought into real estate early.
How did you get involved in real estate investing?
I bought my first house when I was 22 in Southern California for $250,000. I didn’t want to pay rent and I didn’t want to pay someone else my money. I owned my house for about 16 months before I sold it. After the riots started I in Los Angeles I knew I had to move. I was in the bicycle industry and bike shops were closing down. I sold my house to a friend for $4,000… I pretty much gave it away because I wanted to move so quickly. The company I worked for sent me to Northern California and I bought a house there with my husband. We ended up doubling our money, so we decided to start buying more property from that point on. Then we decided to start buying multifamily assets in Chicago and managing those assets long-distance. Because of the distance, we ended up bringing our money back to San Diego where we live now and started managing here.
Why did you decide to become a commercial loan officer?
I decided to go into lending because I had dealt with so many transactions due to my investing history. I was in and out of of transactions, I knew what questions to ask and I knew how to do it from start to finish. After working with different lenders I knew Old Capital Lending was the best fit for me. I started my business with the company three years ago and I love it. We do things a little differently at Old Capital and it fit my personality perfectly. I've always been somebody that knows people and I enjoy putting people together. As a lender we are your largest partner, a lot of people are coming to me and asking, “hey do you know somebody here, do you know an attorney, do you know a property manager.” I am able to use my talents to build relationships with certain people and then I can expose other people to my resources. My team is really strong and grows every day. I'm meeting more and more people that I'm influencing and creating something pretty special.
Why is it important to have a good relationship with your lender?
Your lender is your biggest partner. It's a special relationship that's going to bring value again and again. Old Capital is very different than what you'll find with most lenders. Old Capital creates education through podcasts, conferences, offering different meet ups, i.e. “Zoom at 8.” We are more of a relationship lender than a transactional lender. Ultimately, we are your biggest partners. We are carrying around 75% of a deal. We bring the capital to the deal and we provide the relationships to get you to the end. We are going in on behalf of you and we can look at the best option for you. We are in many markets and we are the number one provider of the debt. We probably know the seller because when they were a buyer we provided their debt. Now they are seller and we're going to bring the buyer to them and the cycle continues. We're in some transactions where there could be 3, 4, or 5 different scenarios of new buyers. We also have created relationships with the brokers on those deals. With Old Capital establishing that relationship with you as a lender, we are committing to you as a buyer. That relationship is invaluable, you are committing business with a company and then the fruits of our labor is helping you get into that deal. Old Capital knows how to close deals in down turns and we know what to look for. We know how to support you and your assets.
What are some major changes that have happened in the lending space due to the pandemic ?
So many changes, initially we raised the interest rate super high just to stop the possibility of a collapse. We saw the closing down of bridge loans, we saw the closing down of commercial mortgage backed securities. Banks didn't have access to other banks because they were really involved with the Paycheck Protection Program and the Economic Injury Disaster Loans programs which were the small balance loans to help the employers pay for their employees. That really was affecting our capability to get capital. When they finally opened it up, we then saw principle and interest reserves of 12-18 months. Freddie was my place to go for new syndicators, if you lived 100 miles from the asset and you were going to use using third party property management, Freddie would say, “I will give you the opportunity, I know you don't have any experience but you might have someone on your team that might and that would work.” Now investors need to have two years minimum in multifamily and three to five transactions over a period of time. That's really caused more people to find that extra person to GP on your deal. Now, interest rates are extremely low and the feds just stated that interest rates will not rise for three years. That's up for discussion, economists would say we got to see what's happening with COVID-19, if we can get a vaccine, and what's going to happen with the presidency, so you know a lot of economists are tiptoeing through that kind of question. Exit strategies are changing, instead of looking at 3-5 years, people are extending to 7-10 years. We're discussing now what's happening down the road and what's the best product for you based on your strategy.
Why do you believe that multifamily is still a strong asset class despite the pandemic?
Multifamily is a very resilient asset, everybody needs a place to live and that’s never going to go away. There is a shortage in housing, single family housing is just exploding, and as these assets get more and more expensive people are still going to need a place to live that's relatively inexpensive. Multifamily units offer a more affordable living option. I do think that you're going to see people shifting, there is still a lot of uncertainties. There was an initial decline in rent collections, but the decline wasn’t that significant and now a lot of multifamily rent collections are increasing. The different asset classes have varied in their performance but demand for affordable apartments continues throughout all economic cycles.
What bit of advice do you have for newbies getting into real state investing?
Know everything about the transactions, you don’t have to be great at all of them but you need to understand how the entire process works. From underwriting, to capital raising, to due diligence. Each step of the process is equally important.
Thank you for reading along with my 10 Women in Real Estate interview series. I hope you enjoyed reading them as much as I enjoyed writing them. Please reach out and ask any questions you may have about investing during this time. We would be happy to explain our investment strategy to help you understand the benefits of passively investing in multifamily assets.
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