Multi Family State of the Union Spring 2025

Mike Hambright (00:00.611)
Hey everybody, welcome back to the show. Today I’m here with the one and only Joe Fairless. We’re gonna be talking about kind of challenging times, really a state of the union of what’s going on in the apartment syndication space. And he’s a massive player in that space. So Joe, good to see you on the show.

Joe Fairless (00:14.432)
Hey Mike, looking forward to our conversation.

Mike Hambright (00:16.311)
Yeah, yeah, and we just kind of mentioned that had you on the Flippin’ podcast and it’s almost, it’s been like 10 years and one month. And so it’s crazy that it’s been that long, right? Yeah, I don’t think I had gray, I didn’t have gray hair yet then, but.

Joe Fairless (00:24.718)
Crazy. Wow.

Joe Fairless (00:30.478)
I didn’t have some, I’m still rocking a lot of the black and brown, but I have some gray seeping through.

Mike Hambright (00:40.099)
Yeah, cool man. Well, hey, I don’t know if there’s many people as good that has as much knowledge to talk about what we’re going to talk about today. You’ve got a ton going on in this space. So why don’t you tell us a little bit about your background and just kind of how you got to this point.

Joe Fairless (00:57.582)
Background, I’m from where you are. I’m from Fort Worth, the DFW area. And I moved, I went to school in Texas, went to Texas Tech, graduated, moved to New York City right out of college because I wanted to compete with the best of the best in the industry that I was in, which was advertising. I was an advertising major, English minor. And I was making a whopping 30K a year.

And living in New York City, that doesn’t get you ahead, certainly financially, especially when you got about 19K or so in student loans that needed to be paid off. So what I did is I kept my living expenses pretty low for New York City standards. And as I was promoted and I climbed the corporate ladder, I stayed at the same level

of expenses more or less. So was able to take the money that I made in extra income as I got promoted and I invested it and I invested it into real estate. I invested in the single family homes initially. So I ended up buying four single family homes while living in New York City, but investing in Texas, first house was in Duncanville, the second was in Lake Worth, the third Arlington, the fourth white settlement.

I those homes. was talking to colleagues of mine in the advertising world in New York and they said, well, how are you doing this? I told them, they said, can you tell me a little bit more? So I started teaching in class on it on the weekends and in the evenings some nights. And then one of my former bosses at the time, he attended and he said, well, this is interesting, but if you ever do something larger, let me know.

because he didn’t want to deal with going to buy his own single family house and managing the process. And I said, huh, that’s interesting. I think I have a customer before I have a product. And I realized that I had interest to partner with me, but I didn’t have a deal to partner with them on. So I started looking at larger deals. I also realized that single family homes, were making 250 bucks a month in my spreadsheet.

Mike Hambright (02:54.125)
Right.

Joe Fairless (03:18.894)
But in reality, when someone would move out, they would cost $3,000. I was a spreadsheet thousand there, but not necessarily a real thousand there in real estate. And so I started looking at the single family. I started looking at apartments. then at that time, I was unfulfilled by what I was doing in advertising. And I decided I wanted to leave.

Mike Hambright (03:19.81)
Hahaha.

Mike Hambright (03:24.877)
Right.

Mike Hambright (03:29.325)
Hahaha.

Joe Fairless (03:46.35)
I wanted to leave the industry. I was the youngest vice president of a particular advertising agency on Wall Street. And I decided I didn’t want to be in that industry anymore. I ended up getting laid off, not quitting, which was even better. We lost a big account and the HR woman brought me into office and she said, well, we got to lay off, I’m sorry. And big old grin.

It wasn’t a grin on my face, but internally I was grinning because like, well, shoot, now I’m going to get a severance package and they gave me a severance package. so I had saved up $50,000 and I was paid for about a month and a half after I got laid off. So I had 50K and about a month and a half worth of salary to go make it happen. saved up that money. I got it from a cash out refinance from one of the homes.

Mike Hambright (04:17.027)
was good timing, yeah.

Joe Fairless (04:41.71)
And the first property I ended up finding that I executed the plan on was a 168 unit property in Cincinnati, Ohio. Even though was living in New York City, had 12 investors raised, 843,000 from 12 investors. And then I brought in the brokers and they had money that they put into it. So all in is a little over, I think it’s about 1.2 million.

Mike Hambright (05:10.914)
Okay.

Joe Fairless (05:11.118)
and ended up syndicating the first deal. And if we talked in March of 2015, I would have been in the middle of it. I still had that deal. I think March of 2015, that would be the only deal I would have had, I believe, at that time. And then shortly after we spoke in March of 2015, I met my now business partner, Frank, and we…

ended up buying a deal together in Houston, Texas. then we saw that, you know, it made sense to partner up more formally. And we ended up creating Ashcroft Capital together and off we went. And so since we spoke, I met my partner and we have launched and bought a lot of properties.

all multifamily properties in Texas, Florida, North Carolina, and Georgia. Those are the markets that we’re in.

Mike Hambright (06:21.699)
And so just for some perspective, like how many doors have you invested in as a GP or an LPE in I guess that last 10 years?

Joe Fairless (06:31.694)
I think about 14,000. About 14,000.

Mike Hambright (06:36.673)
Yeah, when you do that many, you start to lose track. So yeah, that’s amazing. And did you have your podcast at that time? I mean, you’ve done a ton of shows on that. And had you started your podcast at that point?

Joe Fairless (06:44.558)
I did, yeah, yeah, had my podcast. I think I probably started my podcast around 2014, August, October, I believe 2014.

Mike Hambright (06:54.732)
Okay.

Yeah, yeah, yeah, awesome. Well, so let’s kind of dive into like a little bit of the state of the union of, you know, from your perspective, kind of high level, what have we been going through here over the past couple of years? And I’ve been going through it too, as you know, I mentioned I’m an investor in a bunch of deals, so any pain that’s been out there, I’m feeling some of it myself as well. But how would you describe the last two years in the multifamily space?

Joe Fairless (07:13.336)
Mm-hmm.

Joe Fairless (07:18.134)
Mm-hmm.

Joe Fairless (07:24.27)
very challenging for two reasons. Two primary reasons. There could be some other reasons too, but two primary reasons. One is supply demand, two is interest rates. So interest rates increased more than what anyone I know anticipated, including third party research companies.

And that locked down the transaction volume for apartments and commercial real estate in general. So there weren’t a lot of transactions taking place over the last two years. And it also increased if you had a floating rate, even if you had a rate cap, it also increased the price of the rate caps if they expired and you had to renew it.

in some cases went from $30,000 to $1.2 million. So dramatically different pricing for rate caps and had a lot of expenses that weren’t underwritten. So that’s one, and then combine that with a historical amount of new supply coming online during that same period of time. And when you’ve got

all the new supply coming online, well, what’s going to happen? Well, you’re going to have lower rents because you have more supply. And that’s what took place. So while the interest rates were increasing, you also had rents that, unless you were in the Midwest, because rents went up a little bit over this last couple of years in the Midwest, but for the rest of the country, by and large, rents decreased, or at least were flat.

over the last couple years. And so you had those two factors. You also had factors of increased taxes, insurance, labor, materials. So there’s that too with inflation. So you had a lot of headwinds as a multifamily owner over the last couple years.

Joe Fairless (09:49.463)
It’s been a very challenging time.

Mike Hambright (09:51.853)
Yeah, kind of the perfect storm of things coming together,

Joe Fairless (09:54.882)
Mm-hmm.

Mike Hambright (09:56.067)
Yeah, for folks that don’t know, a lot of times when we buy these properties or if you buy a property or you’re in an investment, mean, the plan, everybody always hears the phrase value add, right? So the intention is there’s usually a plan to get the value of it up over two or three years and then lock in long-term financing at the time. Nobody estimated going from four and a half or 5 % to eight or 9%, right? so, because then the problem is you may be

Maybe you rehab it maybe you make some improvements you get to try to get the rents up But then if there’s more supply coming on and the occupancy is down your vacancies up Then even if you could get those cheaper rates They may not be available to you because your your occupancy is not as high as it should be right Yeah

Joe Fairless (10:43.47)
Mm-hmm. Yeah. Yep. That’s right. Yeah, there’s is a double-edged sword. Because if you if you

If your focus is on maintaining occupancy during that time, then you’re doing rent concessions and then your NOI is decreasing and then you need to be mindful of your loan covenants and what type of debt service coverage ratio that you need or what type of income, what kind of NOI do you need to bring into the table in order to satisfy what you.

said you would with the lender. It’s a balancing act that a lot of operators had to go through for the last couple of years.

Mike Hambright (11:37.985)
Yep. So let’s talk, let’s kind of break into some of the main areas of the business. I know that you’re not necessarily the one that’s focused on underwriting in the business, but I know generally syndicators, there’s not a lot of deal flow and not a lot that are priced reasonably right. So underwriting has to get a little more strict. So what are some things that are maybe happening on the underwriting world to be a little more risk averse than maybe in years past?

Joe Fairless (12:07.374)
Those items that I mentioned, property taxes, you also want to try and freeze time with the renovation material expenses as much as you can. What I mean by that is something that we do is we buy a lot of our renovation materials from overseas at the beginning of the year.

and that locks in the pricing. Now, this might change with tariffs, by the way, but what we’ve done historically is we’ve done that, we’ve locked in the pricing, and then regardless of what happens with inflation or with some sort of trade war, well, we’ve already got our materials for a period of time.

looking to lock in pricing as much as possible to not be at the mercy of the fluctuations that take place. And you can do that across the board for other line items as much as possible. For insurance, have portfolio-wide insurance versus on the property level. So that if we have a property in say Tampa,

while we get better pricing because the whole portfolio, most of it is not located right next to a big body of water. And so we’re getting better pricing as result of that. just looking for ways to try to get economies of scale or leverage economies of scale, but then also locking in the pricing at the onset.

as much as he can. Finding opportunities right now, as you mentioned, is challenging because generally there’s a gap between what buyers think the property is worth and what sellers think the property is worth. The reason why there’s generally a gap, although it’s getting smaller, the gap’s narrowing, is because the owners of the properties, they see the writing on the wall.

Joe Fairless (14:31.512)
they see what I think is likely to take place over the next three to four years. And that is that supply demand shift is about to snap right back to the owner’s favor. And the headwinds are gonna be tailwinds because those properties that were being built, leased up and brought online over the last couple of years, by and large, they’re done.

or they’re completing that cycle and there’s not a lot behind them. The reason why is because the interest rates are higher. So the new construction projects didn’t pencil over the last couple years. So you didn’t have a whole lot of starts of new construction projects over the last couple years. So what’s that mean? Well, that means that there’s not a lot of new inventory that’s going to come online over the next handful of years, two to three years. They’d have to start now.

in order to be competition to us in two to three years. So there’s a window of time. And the owners of properties generally know that. They know that, hey, if I can hold on, rents are supposed to increase. There’s a crazy amount of demand because even with that supply demand that was an historical, I think since like the most supply…

that hit the market since like the 70s, something like that. Even with that, occupancy levels on a national level maintained around 92, 93 % occupancy. So there’s still a lot of demand for apartments. And if you think about it, a 92, 93 % occupancy while in the middle of a storm, of a perfect storm, as you said, that’s pretty good.

Mike Hambright (16:09.123)
Mm-hmm.

Yep.

Joe Fairless (16:25.336)
So what’s gonna happen when that supply tapers off? Well, naturally occupancy is gonna go up and rents are gonna go up. owners know that. Some of them are not able to wait that long though. And sellers know that too, or excuse me, and buyers know that too. They know, well, hey, in a couple of years, it’s gonna be really good. So I wanna try and get some deals right now.

Mike Hambright (16:25.357)
Yeah.

Mike Hambright (16:53.922)
Mm-hmm.

Joe Fairless (16:55.534)
So what we’re finding is there are some deals that are not distressed that we look at, but by and large, I we find opportunities, the best opportunities right now where the deals are distressed. I we’re buying one in Fort Worth direct from a lender because the lender unfortunately foreclosed on the group that used to have the deal.

and we have a relationship with the lender and we have our own property management firm headquartered in Coppell, Texas that manages all of our deals in the Sun Belt. And we told the lender who we have a relationship with, if you are going through a foreclosure process on another group, just know that we have a management company that can help you bridge the gap. And they said, okay.

we’d like to show you some deals too. And they showed us six deals. None of them made sense except for the last one. by the way, what’s interesting is that the first five out of the six, the first five, they were offering it just for the loan balance. All the equities wiped out. They were just offering for loan balance and the deal still didn’t make sense. But that sixth one,

Mike Hambright (18:16.28)
Wow.

Joe Fairless (18:21.838)
It did. We’re getting it at the loan balance, but the deal makes a whole lot of sense. We’re also getting some preferential financing fixed interest rate, 4.5 % for the whole period and a lot of other buyer friendly.

Mike Hambright (18:39.843)
And is it the same lender that’s offering those terms like they’re trying to help?

Joe Fairless (18:43.84)
Yeah, so the lender owns the property and so we’re getting the loan direct from the lender. Yeah, that owns the property because they’re sweet in the pot. So there are opportunities like that. And so if you’re a multifamily owner and you’re looking for opportunities like that, one thing I suggest is even if you don’t have your own property management company, talk to a property management company that you do use.

Mike Hambright (18:53.421)
They’re having to kind of sweeten the pot a little bit just because of where things are,

Joe Fairless (19:13.058)
and say, hey, I’m gonna talk to some lenders I have relationship with. I’m gonna tell them, hey, you should work with so-and-so property management firm because they’re ready to go, they’re solid, they’ll do a great job. And I’d like to look at your deals too while they manage it or before they manage it. That way, if you need me to, if you’re looking to offload it, because they are looking to offload it in most cases, then,

I can be that person, we can be that group. So you can work your way into good situations to find good deals right now. It just takes a little creativity.

Mike Hambright (19:54.125)
Yep, yep. Let’s talk about money raising. Like from the standpoint of money raising, I know there’s a lot of money on the sidelines right now. There’s a of people that have money tied up in deals that aren’t performing. But what is the overall kind of temperature on the money raising side of the business looking like?

Joe Fairless (20:12.11)
Low, low temperature. I’d say it’s hard to raise money right now. We’re offering terms that we’ve never offered before, to best my knowledge, where if investors are investing a certain amount, then they’re getting, it’s 100 % of the upside in certain scenarios.

It’s.

Mike Hambright (20:40.995)
Is that just because of fear of how things have been over the past few years? Is that largely what it is?

Joe Fairless (20:47.086)
Many reasons. Some self-inflicted, unique to us, because we have some deals that have paused. We have a decent amount of deals that have paused distributions. We’ve done a couple capital calls. That would be one reason for us in particular. But then also for the industry in general, mean, up until

very recently, the stock market was humming along. And if you wanted to make 5%, you put it in the money market. So it’s tough to compete with that when you have deals that don’t make 5 % year one, or if they do, OK, why wouldn’t, as an investor, might think, why wouldn’t I just wait?

I hear you, but I’ll look to later. There are reasons why I’m investing in multifamily now, because I believe there’s a window of time and we’re in it right now where we can get really good deals and good pricing. And I think in the next two to three years, we’re going to be able to realize that value from the deals that we buy right now. That’s why I invest right now.

But it’s challenging across the board for people for a host of reasons.

Mike Hambright (22:20.503)
Yeah, yeah. So where do you see deal flow coming from over the next couple years? Is it mostly from foreclosures or deals that didn’t work out? Like where’s that deal flow coming from?

Joe Fairless (22:32.781)
I think it’s going to be a lot of it is going to be from deals that have been waiting to sell and once they see that there’s a glimpse of some sunlight, the markets are opening up, interest rates have settled, they don’t necessarily need to go down anymore, but just

have settled the five year, the 10 year treasury has kind of settled a little bit, things have calmed down politically, then I think you’re gonna see a lot of deals come to the market. And you already are seeing a decent amount of deals come to the market. I’ve heard anecdotally that brokers in DFW, have 12 listings right now from Q1 when they had four all year last year.

I mean, it’s just, it is already picking up and DFW is gonna pick up faster than Atlanta. Atlanta is a little bit farther behind than DFW. It’s market specific too. You’re also gonna see deals that are forced to sell. I I’m a limited partner, I’m a passive investor in over a hundred deals.

Mike Hambright (23:34.103)
Mm-hmm.

Joe Fairless (23:57.678)
And I just, just yesterday I got an email that said one of the deals I’m a passive investor on was foreclosed on and all the equity is gone. It was actually a deal where we had 1031 our proceeds from another transaction with them into this one. And that deal was in Austin, Texas. know, it, it, you, you, there’s still, there’s still deals like that, that

that need to be worked out. from what I’ve heard and from our experience, most lenders want to work it out, but apparently some lenders are playing hardball and unfortunately it’s not gonna be good for anyone.

Mike Hambright (24:47.149)
Yeah, talk about, mean, obviously I think, you know, over the past.

you know, up until this issue here for many years, it was just easier to raise money and it kind of covered a lot of sins with the appreciation and the rent increases and all that stuff. That was kind of offsetting, you know, folks that were not necessarily great operators. And I think that’s a lot of what’s happened over the past couple of years is people that, you know, some people were better at raising money than they were at being an operator in the business. And that’s obviously what’s gotten some of us here. But, you know, I guess that’s an important part of the

to writing now is to make sure that people have a proven track record of who they’re investing in operationally, right?

Joe Fairless (25:28.046)
I think, yes, I think that…

I think it’s important to know the operations, who’s overseeing the operations. When we’re investing passively, want to know who’s on the general partnership and who’s the one overseeing it, what management company’s overseeing it, who’s watching over that management company. As I mentioned, we’re vertically integrated.

our company, Birchstone Residential, only manages Ashcroft properties. We make mistakes too though, right? even, you know, we continue, and when we do, we work to correct them and work to, you know, optimize the system along the way. in theory, we’re getting stronger and stronger as we go along because we’re correcting things and getting stronger. But.

You have to have that level of accountability and ownership. You have to that level of ownership over the management of it because there are certain circumstances. Again, I’m a passive investor on a lot of deals and I’ve seen the deals that have gone south that I’ve been a part of where the operator communicated

really well and did their best and they just bought at the peak. Wrong time, wrong business model and I lost money. But they communicated throughout the whole process. Not that that got me my money back, but…

Mike Hambright (27:14.455)
Right.

Joe Fairless (27:16.376)
people make mistakes and they owned up to it. Whereas I’ve seen other groups, they’re gone, they’re AWOL. I don’t even know who’s on the general partner team because they don’t put their names on it. If I email, there’s no response. I should know, but I don’t. I could find out, obviously, but it’s just not immediately obvious. Yeah, and so, you know, you just…

Mike Hambright (27:42.531)
They’re not trying to be as clear.

Joe Fairless (27:46.99)
We hosted our conference this past year as the ninth year best ever conference.

Joe Fairless (27:54.72)
check it out next year. We’ll be in Salt Lake City. And there weren’t a lot of conferences that took place this year. A lot of them were canceled. We did ours. We had about 700 people there and it was high quality people as always. And those people who were there, they’re in it for the long haul. And that’s the key to all of this is long term relationships with long term people. We’re in it for the long haul.

and there will be mistakes made along the way, but we’re gonna work to correct them and we’re gonna have a long-term vision in mind. I think having that approach, Tony Robbins talks about treat it like the beginning and there won’t be an end, Like if you treat the relationship like it was at the very beginning, then there won’t be an end. That’s the thought process that I think.

is the right thought process to have, especially during challenging times.

Mike Hambright (28:56.983)
Yeah, for sure. And I think a lot of folks that got in, you know, a lot of folks that didn’t necessarily have a lot of money. They maybe just met the requirements and they jumped in and they kind of got in thinking there’s no risk here, but there’s still risk in everything. It just happened to be the perfect storm came together and it made it more risky than maybe anything’s been in quite some time, but the risk is still there, right? Yeah.

Joe, maybe you share just a little bit on your, you’ve kind of shared a bunch of it throughout here, but a little bit on your kind of outlook for, you know, maybe the next couple years and even the next five to 10 years.

Joe Fairless (29:35.694)
Five to 10 years, you got me. I don’t know. I don’t know what’s happening in five to 10 years. I know what I want to happen. know what I, you know, I speculate, but who the hell knows five to 10 years? Nobody knows. Supply demand over the next three to three, you know, one to three years is projected to swing in the favor of owners, multifamily owners, for the reasons I mentioned before.

Mike Hambright (29:38.816)
Yeah.

Joe Fairless (30:04.75)
So we’ll see what happens with interest rates, we’ll see what happens with inflation, but I’m pretty confident with supply demand being in our favor as multifamily owners. And if interest rates and inflation can stay neutral, then that’s gonna be very beneficial given the supply demand swing for multifamily. If inflation and interest rates.

can go lower, then wow, that’s gonna be a really good thing. And if they go higher, we’ll see. It depends on how much higher inflation goes, how much higher interest rates go, but it won’t be a good thing for multifamily.

Mike Hambright (30:54.219)
Awesome, Joe. Well, thanks for sharing your insights with us today.

Joe Fairless (30:57.952)
I enjoyed their conversation, Mike. We should do this every 10 years. See you in 2035.

Mike Hambright (31:00.555)
Yeah. Let’s do it in five this time. How about, yeah. Hey, if folks want to learn more about you or connect with you in any way, where do they go?

Joe Fairless (31:12.878)
If you want to check out our conference, the Best Ever Conference, you go to besteverconference.com and get on the list and that way you can get all the latest deals and whatever else we got for you there. That’s in Salt Lake City every year. If you haven’t gone, talk to someone who’s gone, post on LinkedIn, ask someone, ask for people who have gone and just ask their feedback and you’ll hear some good stuff and it will be compelling.

For passively investing in deals, you can go to AshcroftCapitol.com and we’d love to start a conversation with you.

Mike Hambright (31:52.353)
Awesome, we’ll put links down below in the show notes here. So good to see you.

Joe Fairless (31:57.208)
Good seeing you too. Deal.

Mike Hambright (31:58.103)
Yeah, buddy, let’s not wait 10 years for real this time. Yeah, all right. Everybody hope you got some good insights from today. We’ll see you on the next show.