How to Find Emerging Real Estate Markets Before Prices Rise

Stephen Mansfield (00:00)
They said to me, and I will never forget it, follow the cranes, where you see the cranes building, where you see constructions occurring. I don’t want you to spend money there because that land’s already expensive.

I want you to go to a block or two beyond it, know where the trend is, and invest just past the cranks. And I think that’s the case here. In Northwest Arkansas, we have a fast growing market. A lot of people want to invest in some of the hottest neighborhoods. Prices have already doubled and tripled in the last few years. And I’m trying to advise them, don’t go into the heart where it’s already happened. Let’s go to the fringe and find the places where

new construction will be in a year or two and invest your money there.

Scott Bursey (02:16)
Welcome back to the Real Estate Pros podcast powered by Investor Fuel. I’m your host Scott Bursey And today we’re joined by Stephen Mansfield, a true Titan from Coldwell Banker Harris McHaney Faucette in Rogers, Arkansas. With over 39 years of experience, Stephen has operated everywhere from Wall Street as its first commercial mortgage trader, managing over $4 billion in transactions to local small assets.

expect a master class today pros and how to bridge the gap between high level institutional strategy and boots on the ground local execution. Stephen, welcome to the show.

Stephen Mansfield (02:59)
Thank you so much, Scott. It’s a pleasure to be here.

Scott Bursey (03:01)
It is an honor to have you here. And for our pros that may not be familiar with your journey, please give us the 90 second highlight reel of how your career ignited and where you’re pouring your fuel now.

Stephen Mansfield (03:13)
Okay, I’d be happy to. I did want to be a developer early on and I went to school at the Wharton Business School. have a degree in business management, bachelor’s degree. I have a master’s degree in real estate and in finance. I wanted to go build shopping centers with people like Titans like Mel Simon. That was my goal. It didn’t happen, right? So I’ve taken a unique career path.

And I was offered an opportunity to be the first commercial mortgage trader on Wall Street and help build a whole new business from scratch. It’s the secondary market or CMBS market, if you know what those stand for. I was there for a number of years. I went off, I joined a company that during this failed savings loan crisis and banking crisis, I built their second company that was their second largest client.

And when they took over a bank, they didn’t know what the real estate assets were. But I would fly out to that bank with auditors, and we would send back reports and value the properties, look at the loans, value the loans. I was called back to Wall Street for a few years, which I did as a mortgage, as a real estate investment banker. And then I got a call to move to Arkansas. A friend of mine,

was down here, one of the wealthiest women in the world, was starting a real estate, or had started an investment bank and asked me to come down and start up a real estate division for her. Did that fabulous institutional on a small level, but institutional kind of product. And when that ended, I started investing my investment journey. I moved from zero to over thousand apartments in a matter of five years, apartment units.

I had retail, office, hospitality, self storage. And because of that, I built my own property management company, which turned out to be the third largest in our market for not only my own product, but also third parties. Went and did a couple of huge rehabs after the market turned down a little bit around 2008, 2010. Bought an apartment complex outside of Atlanta.

bought a boarded up hotel outside of Cleveland, Ohio. And then I moved back here in the around 2020 and decided I want to be a little take it a little slower. And I got my principal brokers license back again and started with Coldwell Banker. And I’ve been here as the sole commercial real estate broker to the top residential brokerage in the state of Arkansas. So now

Scott Bursey (06:40)
That’s an incredible journey, Stephen, moving from those early high stakes days on Wall Street to where you are now. It’s rare to see someone bridge that gap. So effectively, thank you for sharing that background. And what really caught my attention about you was the way you’ve been able to navigate and execute over $4 billion in transactions across such drastically different

real estate landscapes. That’s quite an achievement.

Stephen Mansfield (07:13)
Thank you. Yes. And it’s been a fun ride as well.

Scott Bursey (07:15)
Curious to know on that note, when you look back at that massive transaction volume, what is the single achievement that fundamentally transformed how you view the value of an asset today?

Stephen Mansfield (07:28)
I think it comes down to very detailed underwriting. Having to do that many transactions and to be responsible for them on the early days with the, with Wall Street for other institutions meant that I had to be spot on in knowing what was happening at the property. So at the property level, if you’re not reading leases, if you’re not getting your feet dirty, if you’re not getting on a roof, if you’re not doing your due diligence,

you’re leaving a lot of risk on the table. And that stayed with me ever since.

Scott Bursey (08:00)
wondering, given your 39 year history, what do you consider your greatest structural strength when analyzing a new asset?

Stephen Mansfield (08:09)
Structural strength for a new asset. So a couple of things. I have a philosophy that I went for investing that starts at the top down. It’s look at the macro, then get to the micro. When I’m looking at the macro environment on a new asset, whether it’s an existing built structure or somebody’s building a new product, I want to know that the roads are there, the infrastructure is there, that the economics are there. I want to know that the…

that there’s in migration and growth in whatever that’s serving. If it’s retail, we have an expanding retail base. We have more people coming to a market. I want to look at those details as well as the details on the site. If it’s an existing property, what do the leases say? Where are there problems in the lease? I see so many people who take leases by cutting and pasting off of the internet and build their own.

as opposed to properly structuring them. And it causes problems. So it’s detailed due diligence, detailed analysis, and then you wrap up whether the risk to the reward is appropriate.

Scott Bursey (09:14)
How do you leverage those strengths to stay ahead of the competition?

Stephen Mansfield (09:17)
gosh. I guess I do a lot of extra work, right? Most brokers, they’ll put a sign in the yard, stick it in the listing service and pray. I don’t do that. So I spend a lot of time in the numbers. I spend a lot of time with the legal documents for all of my clients. We had a situation recently where I had someone who wanted to sell a property.

And I started looking through the leases and it was one of those cut pace jobs. Definitions didn’t match, rights and responsibilities didn’t match, and an assortment of problems. And I went back to them and I said, I’m sorry, I don’t think your property is worth anything. And they were like in shock. And I said, let me take you through it and I will show you why you really don’t have any rights. And let me help you.

and fix it. It took a little while. spent about six months back and forth to fix all his documents, but I was able to sell the property for him, which he had not been able to do for over three years. That’s how I do it.

Scott Bursey (10:50)
Stephen with markets rapidly changing, what do you see as the biggest internal vulnerability for most institutional investors currently?

Stephen Mansfield (11:00)
For institutional investors, think we have obviously economic issues, allocation issues of funds, depending upon the market. And every market is different, right? I’m lucky and blessed to be in this market. It’s fast growing. It’s got low vacancies, high increasing rents and lower yield because of it. So many investors are flocking to it, but we have some difficult markets around the country.

So for institutional investors, staying on top of those, having contacts in each market that really know that market, very in a detailed way, and being able to find good places to invest money.

Scott Bursey (11:38)
We’d love to hear your take. Where is the biggest hidden opportunity in our current local markets that most people may be overlooking?

Stephen Mansfield (11:48)
Do I have a minute to give you a quick story or should I just tell you?

Scott Bursey (11:52)
We would love to hear the story behind the opportunity.

Stephen Mansfield (11:57)
Sure, sure.

So our market is just that it’s it’s fast growing. It’s got a lot of new construction I once had an opportunity as a summer intern to get a job with one of the major insurance companies They said Steve I had one question Steve if we give you all the money that we have to invest tell me what you would do with it and I started going through the same macro down to micro thesis where I would invest it where I would go and they kept saying

Okay, tell me how you’d invest it. And I get down to the city and I get down to doing due diligence. I get down to talking to the mayor. I got down to where new properties are going. And they said, well, you’re not telling me where would you invest it? And I said, and I told him how I would find a parcel. They said, wrong. You did not get to the job.

They said to me, and I will never forget it, follow the cranes, where you see the cranes building, where you see constructions occurring. I don’t want you to spend money there because that land’s already expensive.

I want you to go to a block or two beyond it, know where the trend is, and invest just past the cranks. And I think that’s the case here. In Northwest Arkansas, we have a fast growing market. A lot of people want to invest in some of the hottest neighborhoods. Prices have already doubled and tripled in the last few years. And I’m trying to advise them, don’t go into the heart where it’s already happened. Let’s go to the fringe and find the places where

new construction will be in a year or two and invest your money there.

Scott Bursey (13:25)
What is the very first step an investor should take to capture that opportunity?

Stephen Mansfield (13:30)
Well, I think it comes down to research. So for me, it’s I’m looking at new streets, where are streets going in? I’m looking at where population is growing. I’m looking at where the cities need to build new schools because they know five years from now, they’re going to outpace, right? So you’re looking at data and demographics. And again, it’s macros stuff.

what’s changing, what’s looking forward. And the other thing that I do often, Scott, is I look at building permits, where developers are pulling permits, what’s planned for the horizon. I know how long it takes to build a multifamily project or a retail project in our markets. And the different cities are different timeframes. And I’m looking at how many permits are being pulled, what’s been delivered, and what the absorption has been over the last couple of years.

to see whether I expect vacancies to go up or down, whether I expect to see too much supply or not enough supply, and try to get a sense of where to target. Because real estate, unless it’s built, operating, and running, and there are lots of those, that’s an immediate investment, but there’s also investment for the future. And I want to make sure I’m in the right place and my clients are in the right place.

Scott Bursey (15:28)
Stephen, looking through your lens, the macro lens, the macro landscape, what do you see as the biggest external threat to commercial real estate stability over the next, let’s say two years?

Stephen Mansfield (15:42)
Well, I think we certainly have interest rate issues, right? Right now with inflation, the war that’s going on and some other things in Iran and other places, I think there are some larger picture items over the short term, over the next year to year and a half too. And I also think that there are some markets that have been unfortunately hurt over the last few years and are starting to see

delinquencies, loan delinquencies, another statistic I look at, and some markets that are growing really fast. We’ve had a transition from our typical growth markets to some unusual characters. then, for example, in the central Midwest, I do think that both of those are potential short-term opportunities and risks. knowing which way you’re playing,

Makes sense, there are lots of opportunities. I spent a little bit of my career as a circuit civil mediator down in state of Florida, and I was handling real estate disputes. And I see that we’re gonna, I believe we’re gonna have more disputes because of some of these stresses in the market. So knowing what to do is key.

Scott Bursey (16:55)
Well, thank you for highlighting that, Stephen, and digging into your expertise on Phase I environmental surveys. How has that technical knowledge changed the way you approach the make or break point of a deal?

Stephen Mansfield (17:11)
Sure. So I was blessed to be part of the very early stages of working with ASTM and some of the rating agencies and so forth in building the environmental Phase I, you know, documents and strategies. And I will tell you, I think I look at it as what is the remediation? What is the cost if there is environmental issue? I was one of the properties

Very important property in downtown Fayetteville, Arkansas that I bought with a partner years ago was an old train depot. It was right in the heart. was down in that, you know, down at ground zero. And we had plans for a large multifamily project. We did the environmental report as part of our due diligence, our Phase I. We found out there were heavy metals, high concentrations of heavy metals on the property. It would have probably turned many investors away.

And instead we looked at it as an opportunity. How can we remediate it? What’s the cost of remediation? Do we still want to buy this property that is in a fabulous location? And do something different and we turned it into believe it not, we encapsulated the ground because the local. The local. Dea or not to the local environmental groups did not want humans walking on the property.

So we paved over it, encapsulated it, and we ended up building a pay parking lot that was incredibly successful. So it gets down to, I just, I’m to point one other thing out. I hear a lot of people say, oh, especially in houses, they say, oh, I see black mold. Well, most mold is black. Black mold is the most toxic and there’s no way to tell unless it’s tested. So I don’t take environmental issues

in a necessarily negative way. I see them as a hurdle that needs to be evaluated and a decision made as to whether a project should go forward or not because of what the results are. And that all comes out of that early knowledge with ASTM and Phase I. Hope that helps.

Scott Bursey (19:20)
It certainly does. And you spoke of heavy metals and black mold. Do you believe this is becoming more critical for smaller asset investors as well to pay attention to?

Stephen Mansfield (19:31)
Absolutely. And not just that asbestos as well, for older assets and smaller assets. And then we have other issues. I’ve had apartment apartments where, unfortunately, they turn into crack making or drug making facility, and they have to be cleaned up. Or especially when you’re rehabbing older buildings, and maybe the spray on popcorn in the ceilings has asbestos in it. Yes, it’s it’s definitely out there.

And I think as we get into converting a lot of the older industrial sites in some towns have become rusted out cities. We have to take a look at that and how can we remediate it and then redevelop? Yes.

Scott Bursey (20:15)
Thank you for that, Stephen. And if you could walk us through what is your professional network look like right now?

Stephen Mansfield (20:22)
gosh. Well, I’m belong to two invest local investor clubs. One is kind of a very group of real estate investors that are a lot of smaller niche players, home flippers, know, people that are doing smaller. We have a small market and these are newer investors. And then I’m also part of a real estate investor mastermind. About 10 of us.

that are very heavily and more deeply into the market and do bigger kind of projects.

Scott Bursey (20:53)
Thank you for that, Stephen. And given all of your experience, all of your expertise, what has been the key to creating those relationships and building those networks?

Stephen Mansfield (21:04)
I guess it’s being real, being honest, sharing advice. I spent three years teaching at the college level for personal finance and corporate finance. I love sharing my knowledge. I love teaching people. While I was teaching, the best feeling that I ever got was when I was teaching a hard concept and I could see the light bulb come on on somebody, a student’s head. It’s the same thing here. I have…

Last week, I had a brand new real estate agent asked me to go to dinner so I can explain commercial real estate to him because he was trying to do his first deal. I don’t have a problem with sharing my knowledge at all. And I think that’s probably one of the keys.

Scott Bursey (21:44)
It’s interesting to consider what is the one piece, Stephen, of deep dive advice you could give someone looking to scale their own portfolio from local assets to institutional grade deals.

Stephen Mansfield (21:58)
So going from local assets to institutional grade deals to me means smaller projects to bigger, higher quality projects. But maybe for me at least, I like to stay in markets I’m very comfortable with and I like to stay in markets that I’m close to. I used to have a rule, I didn’t buy anything outside a two hour drive from my place. I’m not saying that’s right for everybody because especially today, I think we have really

divergence in markets across the country. And I think people that can scale to larger national or regional kind of business, it’s fabulous. That was not my personal preference. And I had some pretty good reasons for it for me. But I think the key is technology. If you’re going to be managing portfolios in multiple places, make sure you spend the money on security, on software, on key people in each market.

that are there to help you build your brand, build your portfolio, and do it in a way that’s safe. And then I would also say, harvest or find one or two or three really strong investors and or brokers in that market that know it like the back of their hand, because they’re going to be able to help you in heading towards the right direction.

Scott Bursey (23:20)
That is super powerful. Thank you for that, Stephen. And you have given our listeners a lot of powerful advice here already today. But is there any additional words of wisdom that you can leave with our pros?

Stephen Mansfield (23:34)
Don’t be afraid to take the next step. Make sure that you’re not over leveraging yourself and taking additional risk. We are seeing potential headwinds over the next year or two in a lot of markets, not everywhere. There’s some great markets out there, but you don’t want to put yourself in a difficult position if things turn around. And finally, I would say, find somebody that has an institutional mindset.

but is very focused on serving wherever you are, whatever markets they are, they’re in and looking at. Because taking the mindset of, as opposed to just, I’m gonna buy this next Bill of Glam because it’s next to mine, or I’m gonna look at going into an area that needs to be gentrified, but by the way, nobody’s moving in there and I’m gonna be the first one. That may be a risk you wanna take or not wanna take, that’s up to you.

I think getting good counsel and having those people on your side to share information, you do what you want with it.

Scott Bursey (24:38)
Stephen, we’ll put that to use. That is some good information. And for those of our listeners that want to keep this conversation moving, stay in your lane or collaborate with you. What is the best way for them to reach you?

Stephen Mansfield (24:51)
So they can send me email from my website. It is commercialarkansas.com Or they can contact me. I don’t know if I can give my phone number on this, but if I can, I will. You tell me it’s 479-871-2664. Happy to talk to anybody that’s got questions. We may need to make an appointment if I’m busy, but I’m happy to help.

Scott Bursey (25:14)
Stephen, thank you for joining us today on the Real Estate Pros podcast.

Stephen Mansfield (25:19)
Thank you. It’s been a pleasure. Appreciate it.

Scott Bursey (25:21)
It’s been an honor. And to our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be filling your tanks with a lineup of elite guests, just like Stephen Mansfield, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.