markets

Fall 2017 Update & New Markets to Watch

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With summer having come to a close, we want to take a moment to wish our investors a happy fall and to share a few noteworthy developments in the latter half of 2017.

Acquisition Updates

Earlier this quarter, BENA Capital, LLC announced the successful acquisition of another multi-family residential property in Abilene, TX.

We identified the Abilene asset as an attractive acquisition opportunity due to the property’s robust value-add potential and the region’s strong growth trends. Located less than ¼ mile from Abilene Christian University and two hours west of the Dallas/Fort Worth Metroplex – the property was brought to us by our broker in the area who knows we are an all-cash buyer.  It is expected to provide 6% annual cash flow and return 50-55% within four years.  Over the past three months, extensive value-add improvements have been made to the property.  As those improvements come to completion, units have started to lease, with 48 prospective tenants interested in the three units remaining.

New Markets to Watch

With Tier I Markets peaking, we will continue to focus on Tier II and Tier III markets with resilient economies buoyed by employers and universities. We have set up strategic partnerships with a network of real estate brokers in a number of new markets where jobs and renter populations are growing.

Rising home prices and mortgage rates continue to make home-buying less affordable and renting more attractive. This results in stable cash flows and long-term capital appreciation potential for investors who have the ability to leverage zero-debt investment models, such as the one BENA Capital offers, to tap into the multi-family niche.

Here are a few new markets on our watch list:

Fort Worth, Texas

Home to more than 7 million people and growing, the Dallas/Fort-Worth area has added an average of ~100,000 jobs/year since 2010. Local leaders have made attracting large employers a high priority, and major corporations such as AT&T, American Airlines, and Lockheed Martin call the metroplex home. With the University of Texas at Arlington, Texas Christian University, and the University of North Texas also located in the region, there is no shortage of well-educated millennials eager to stay after graduation.

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Raleigh, North Carolina

The metro area surrounding Raleigh, NC has been one of the fastest growing in the country. Since 2010, the city’s population has increased ~15%. USA Today recently named Raleigh the third best place in the U.S. for business and careers, most notably in the technology and life sciences sectors. Nearby tier one universities with deep talent pools include NC State University, the University of North Carolina at Chapel Hill, and Duke University.  They provide a solid foundation that continues to fuel innovation and prosperity in the region. Additionally, Red Hat (headquartered in Raleigh) and Citrix are both major employers in the area. Technology giants like these, along with Research Triangle Park (which includes neighboring anchor cities Durham and Chapel Hill), have been catalysts in the area’s continued revitalization and economic growth.

Chattanooga, Tennessee

Chattanooga proudly touts its “Gig City" badge. When the city built the fastest internet in the U.S., it attracted new businesses to the region. According to an independent study conducted by the University of Tennessee in 2015, this helped add roughly $865M to the local economy since 2010. With its 140-acre downtown “Innovation District” anchored by the Edney Innovation Center and its budding start-up scene, Chattanooga is reshaping itself as a technology solutions hub.


Invest Wisely,

Yousif


Yousif Abudra is Managing Director - Real Estate Investments at BENA Capital. 

BENA Capital manages real estate investment funds, with a central focus on the acquisition and management of residential multifamily assets in growing markets.  BENA Capital's funds provide investors with ease of entry, reliable quarterly cash flow, and portfolio diversification.  Our proven strategies emphasize sound investing in carefully researched, quality properties that have steady, long-term capital appreciation potential.

To learn more about BENA Capital, visit: http://www.bena-capital.com/

Click for Investor Overview PDF: BENA Capital - Overview

BENA Capital Annual Letter 2017

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We received great feedback from last year's 2016 predictions for the real estate market - which you can read here - and are happy to share our thoughts for 2017.

Continuing on the strength of 2016's performance, 2017 will bring some changes and require a skilled approach to selecting the right investments.  Three notable trends are:

1) Slowing Tier I Markets and The Rise of the Midwest

Prices in Tier I markets, such as San Francisco and New York - that saw sharp increases in 2013-2015 - will continue to soften in 2017.  This continues the trend from 2016, as prices reach levels that stretch incomes, rising interest rates eat away at purchasing power, and development projects add supply.

While Tier I markets slow, it is the smaller, more affordable Tier II and Tier III markets that present select opportunities for cash flow and continued price appreciation.  As an example, there are still niche Midwestern cities that are poised to benefit from population inflows and job creation.  These select markets are areas BENA Capital will continue to pursue in 2017.

Takeaway for 2017:  Expect prices to continue to slow or fall slightly in Tier I, Class A markets.  Tier II and Tier III markets such as Midwestern cities with enticing job incentives continue to expand.  Leading the pack are Madison, WI; Columbus, OH; Omaha, NE; Des Moines, IA; Greensboro, NC; and Akron, OH.

2) Increasing Interest Rates

While BENA Capital does not use debt in our investments, we still pay close attention to interest rates and the impacts to buyer purchasing power.  The seven-year stretch of historically low mortgage rates is coming to an end, beginning in 2017.  Mortgage rates have already jumped by half-a-percentage point since late October.  With the recent December Fed rate increase and promises of additional increases in 2017, mortgage rates will continue to climb.  The effect on real estate will be two-fold:

a) Pressure on Prices

Higher mortgage rates will exert pressure on asset prices.  Tier I markets will experience flattening and even falling prices while Tier II and Tier III markets with strong fundamentals have the potential to continue to appreciate despite the higher rates.  Tier II and Tier III markets without sound fundamentals will be the hardest hit and will see falling prices;

b) More Selective Buyers

Individual buyers who have been on the fence will face more expensive mortgages and either buy smaller homes or continue renting.  Institutional buyers will only purchase properties where there is growth potential.

Takeaway for 2017: Expect to see continued high asking prices from sellers, but fewer sales close at those prices.  The bidding wars are largely done as buyers now have an interest rate headwind.  Additionally, expect the number of sales to decrease from previous years as buyers take a more cautious approach.  2017 will be a transition year as certain markets begin to peak, while others continue to experience opportunistic growth.

3) Millennial Renters

Millennials will face challenges as buyers in 2017, as stagnant incomes, lower credit scores, higher debt levels, and rising mortgage rates limit their purchasing power.  Additionally, they have strong preferences to skip the starter home and go straight to the move-up property.  As a result, many Millennials will find this dream unaffordable.  They will be forced to continue renting for the foreseeable future, further supporting multifamily rental investments.

While they rent, Millennials prefer urban and "surban" (suburban with urban amenities) locations.  These cater to Millennial live-work preferences and quality of life choices.  BENA Capital is focusing on these areas of growth that have strong renter populations, resilient economies buoyed by employers and universities.  Prospects include Spokane, WA; Austin, TX; Merced, CA; and St. George, UT.  As an example, BENA Capital's 2016 multifamily investment in the university town of Merced, CA has taken full advantage of the city's growing population, jobs, and student enrollment - earning investors robust quarterly dividends.

Takeaway for 2017: Millennials have the desire to purchase homes, but not the means to do so, leading to continued high levels of renting, particularly in urban-like settings with good job growth.  Expect this trend to continue to support multifamily investments for the foreseeable future.

Overall

Real estate for 2017 will be heavily influenced by the economy, monetary policy, and demographic changes.  Selecting and executing on successful investments will be harder than it has been in years.  However, opportunities are present for the watchful.  Niche market knowledge and the ability to move quickly will be crucial to securing attractive opportunities.

In 2017, BENA Capital will remain highly selective in the properties and geographies that we pursue.  Our investments will continue to focus on cash-flowing, value-add multifamily properties in growing locations which provide our investors with rich quarterly dividends and strong appreciation potential.

Invest Wisely,

Yousif

Yousif Abudra is Managing Director - Real Estate Investments at BENA Capital.  BENA Capital manages real estate investment funds, with a central focus on the acquisition and management of residential multifamily assets in growing markets.  BENA Capital's funds provide investors with ease of entry, reliable quarterly cash flow, and portfolio diversification.  Our proven strategies emphasize sound investing in carefully researched, quality properties that have steady, long-term capital appreciation potential.

Click for Investor Overview PDF: BENA Capital - Overview

 

 

Timing the Real Estate Market: 5 Phases in the Cycle

October 11, 2016 – A majority of real estate observers tend to see markets in one of two states: climbing or falling.  In fact, this is not unique to real estate, but is a common trait seen with investors in stocks and commodities as well.  However this view naturally leads people to invest at market tops and sell at market bottoms (sound familiar?). 

There are actually 5 Phases in the Real Estate Cycle:

  1. Cycle Bottom / Early Recovery
  2. Expansion
  3. Exuberance
  4. Contraction / Early Downturn
  5. Full Downturn / Recession

Take a look at the chart below, which shows the 5 Phases along with where certain US cities fall along the cycle as of September 2016:

5 Phases in the Real Estate Cycle

Each phase may last a few months to a few years, depending on the market.  What's more, each phase rewards very different investment strategies.  And local markets can be in different phases at the same time.  If you happen to live in the SF Bay Area for example, the daily noise from the real estate market would lead you to believe that all real estate is on fire.  But if you happen to live in Houston, your perception is likely quite the opposite. 

As an example, in 2009-10 the SF Bay Area market was in Phase 5: Full Downturn / Recession while the Austin market was in Phase 2: Expansion.  Today, you can see that both are currently in Phase 3: Exuberance. 

What happened? 

The SF Bay Area moved through Phase 5 -> Phase 1 -> Phase 2 -> Phase 3 in just 4 years.  Austin took the same amount of time to move from Phase 2 -> Phase 3.  Each market is different, and requires a knowledge of which phase that market is in and what factors are driving it from one phase to the next.

It is important to note that although each market goes through the five phases, the degree to which prices will swing also varies by market.  That is to say, do not expect to see the wild price swings of a coastal city such as a New York or San Francisco in more stable areas such as a St. Louis or Cleveland.  To limit downside risk, buy in markets that are currently in Phases 1 and 2, and sell in Phases 3 and 4.  If a market is currently in Phase 5, wait it out.

To learn more about BENA Capital, visit: http://www.bena-capital.com/