Multifamily Distress Is Finally Here: How David Berneman Finds Value-Add Deals in 2026

David Berneman (00:00)
We’re finally seeing that distress that everyone’s been talking about. Trust sales, receiverships, REOs, and we’re seeing a lot of really interesting

We just put an offer in on a deal yesterday actually in Phoenix that’s effectively a third of what it sold for just three years ago. So, you know, we’re trying to get back on the horse on the multifamily side and make some new acquisitions this year.

Dylan Silver (01:55)
Hey folks, welcome back to the show. Today we’re joined by David Berneman, founder and CEO of Golden Bee Properties, overseeing a $300 million real estate portfolio across Southern California, Arizona, and Nevada. He leads acquisitions, asset management, development, and property management operations with a focus on value add multifamily and ground up development opportunities. David, thanks for taking the time today.

David Berneman (02:19)
Thanks Dylan, appreciate being here.

Dylan Silver (02:21)
Now you’ve built a vertically integrated company, large portfolio. What were the biggest turning points that helped Golden Bee scale?

David Berneman (02:30)
Yeah, that’s a question. You know, we started back in 2011, officially owning and managing a six unit apartment building in South Los Angeles. And I’ve expanded from there. would say the primary thing that got us to where we are today is really my family. You know, I was joined luckily by a variety of family members who had a lot of experience and various capacities of real estate.

from the construction design side to the operation of a management company to the legal and so forth. And every single person who came through was able to kind of add to the mix, right? And effectively make the business more cohesive, larger, and expand in a variety of different directions as we have today. So, luckily and serendipitously, was…

joined by a variety of different family members who really were able to propel the business into what it is today.

Dylan Silver (03:23)
Now, you mentioned scaling from some smaller multifamily deals. Was the intention always to go larger and to be purchasing a larger portfolio or was the intention when you were starting out different?

David Berneman (03:36)
Yeah, I would say the intent was to start an organic investments in property management business that could slowly grow, right? Organically, there was not an intent to go straight into buying 200 unit apartment buildings day one, right? We knew we had to grow this organically, build our investor base up, get the trust of our investors and the community around us, and slowly propel it to what it is.

The intent wasn’t necessarily to be where we are today, but here we are. would say that there are different facets of the business that have grown faster than expected. For example, on the construction side, we did not intend originally to have our own construction company, but it just sort of grew organically. We knew we needed to service our own assets and it was difficult to find construction crews that we could rely on. And so we decided to, back in about 2018, build our own construction business.

And that’s been very, very helpful in getting us to where we are today.

Dylan Silver (04:36)
Now, in the construction space, especially when we’re talking about distressed value add opportunities, it seems to me that one of the huge opportunities that investors have is to bring that in-house. But also, that eliminates a lot of the friction with trusting your contractor and your subcontractors and that type of

David Berneman (05:45)
Yeah, no, for sure. I think that it’s the reliability of it, right? Being able to effectively pass the baton as we do currently from our investment side of our business to our management side of the business and then to the construction side of the business and, you know, back and forth. ⁓ It’s pretty seamless and it’s very nice to be able to, ⁓ you know, have in-house construction teams and project management teams ⁓ to help us with some of the bigger projects on our assets, right? You know, for example,

we’re doing ADU work or adding ADUs to a variety of buildings and in years past we may have had to outsource that work. Now we can do that in-house with our in-house crews and thus meetings internally are very seamless. We have project managers that work directly for us on the construction side that are able to communicate to our leasing team and say, these units are going to be up online X-Day, be prepared for it.

⁓ So any of the bigger ticket projects that we do, we’re able to really get a good grapple hold on their timelines, budgets, and so forth. And it’s been very, very helpful to have that in-house.

Dylan Silver (06:56)
Now, when we talk about the value add space versus the ground up space, I know a lot of people will maybe stick to one and maybe stay away from the other. Do you have a preference for value add versus ground up construction?

David Berneman (07:10)
You know, we’ve done both at various scales. you know, it kind of depends on your interest level. I would say the ground up side has a lot of additional elements on the front end related to the entitlement processes, right? And, you know, I cut my teeth and a lot of that early on working as a consultant for many years before I started my business. And so I have a good sense of how that process works, but it adds a lot of other risk and dynamics to it, right? So the ground up game.

is a little bit different in that sense versus value add, not to say there aren’t some entitlements and permitting processes involved, but it’s just simpler. And so there’s that pro and con. The other thing I would say in favor of development is that we’ve seen the value add side. Sometimes you think you’ve budgeted correctly, but once you open up the walls into a unit or let’s say the ADU projects, things like that.

You you open up these walls and you start seeing something very different than what you initially anticipated. And so it adds to the cost. Whereas I’m ground up for the most part, again, not a hundred percent, but for the most part, you got, you know, you got a flat piece of dirt. You, kind of know you’re able to get your subs in line, get your trades going, get your budgets and, know, barring something crazy from the city, which does happen. you know, you should be able to fall in line. So it kind of depends, you know, there’s pros and cons to the, the different types of models.

We like them both. We like to sort of diversify and you know different risk profiles so we’re always trying to do them both.

Dylan Silver (08:35)
Now, when you’re looking at deals, whether it’s Southern California, Arizona, and Nevada, I’m imagining these markets are evolving differently. Do you have almost a season where you might be looking at one market versus another? Is it strictly, what are the numbers on this deal? How do you decide which market to invest in?

David Berneman (08:55)
Yeah, that’s a question. know, kind of leaning into what I was just talking about on the development side and construction side, you for us in California, you know, most of the deals have to have some essence of heavy lift value add to them in order for them to really pencil and work for us, right? That may include adding units, ADUs, taking buildings down to the studs and then bringing them back to life, right? So the California model for us has to be more of that heavy lift in order for them to really pencil.

Whereas what we’re seeing in Nevada and Arizona is a little different. Those are your sort standard Sunbelt markets, at least currently, they’re a bit oversupplied, right? And so we have that issue, but that also has led to some opportunities more recently. And so those markets, it’s more of your sort of standard workforce or affordable housing deals where, yes, we’re gonna go in and we’re gonna do some work to those units, but we’re not doing the same level of extensive overhaul as we would here in California.

we just have to look at it a little differently, right? So for example, the vintage of an asset in Vegas or in Phoenix, for example, is going to generally be newer than what we might purchase here in Los Angeles. Just given, know, dynamics of sort of the value-add components of things and, you know, deferred maintenance, we need to make sure that that vintage is a little bit newer. So those are some differences.

Dylan Silver (10:46)
Now, you mentioned that there is sometimes oversupply and I’m in Texas, right? So I’m just outside of Austin. So what’s interesting is there is definitely oversupply, but there also still feels to be a shortage of truly affordable housing. And so that juxtaposition can be odd as you’re seeing what feels like class A, multifamily, apartment complexes go up everywhere. And there’s still lots of people looking for a rent that they can afford at the same time.

David Berneman (11:13)
Yeah, no, it’s funny you mentioned Austin. was actually just there back in February visiting an investor of ours who’s got some interesting projects going on there. And Austin and Phoenix are kind of the epicenter right now of that kind of oversupply story. But I think from my read of it, ⁓ this is more of a short-term issue. If we look at the overall trends of unaffordability, the need for housing nationally,

You know, the, the Sunbelt market has just got hit, you know, most recently in the last couple of years with, an extra amount of construction activity, right? Which is good and bad. And so I think that that needs to flush its way through, and cycle through the sort of market conditions that we’re currently in for the next, hopefully one to two years. and we’re also already starting to see, you know, that construction pipeline is slowing down in places like Austin and Phoenix quite dramatically actually. And so unfortunately what that means is I think you’re going to have this kind of.

run up yet again in a couple of years where all of sudden there’s not a pipeline, there’s still a need for affordable housing, and so it’s going to run up values ⁓ in places like Austin and Phoenix and others. so it’s cyclical, right? It’s just the nature of the beast of real estate.

Dylan Silver (12:25)
mean, when we talk about when and how to invest and should you be investing with partners, syndication and so forth, one of the things that I’ve routinely seen hosting this show is people talking about variable rate debt and how that can be tricky. I’m curious to get your feedback. Is variable rate debt a leverage tool or is it something that can potentially burn you?

David Berneman (12:49)
Both, actually. And we’ve seen it both ways, to be honest. You know, some of our existing portfolio that had variable rate debt and still does, you know, when we purchased assets in 2020 and 2021. Yeah, we’re dealing with the ramifications.

of all of that stuff, shortly thereafter, starting in 22, 23, where rates just picked up precipitously. so what was a value add component for us because we needed the construction dollars with bridge money to do all this work we were doing, ADUs included as examples, those were the values of it. And now it became a burden because we have this interest rate that went from 3.5 % and ballooned up to 7.5 in a matter of six months.

that is a problem. But interestingly enough, I would say is where we are in the market today. It’s almost like the bridge money and the debt funds are coming back into favor because as interest rates on the fixed rate, permanent side are sort of equal to where some of that bridge money is, you’re almost better off taking the bridge money with the likelihood of interest rates eventually coming down a little bit. Maybe they don’t come down that much, but even so, you’re getting a slightly higher leverage point.

and having more flexibility, assuming again, you’re doing some value add stuff, right? If you’re, if you’re looking for, you know, more of a blue chip asset, you know, that’s just kind of spinning off cashflow, giving a coupon and you know, there’s not too much to do to it, which by the way, we’re seeing some of that too, with some newer construction deals that are hitting the market. that may be a different story, right? That, that definitely leans more into the permanent finance world, but anything that may require a value add component. yeah, the bridge market is just more advantageous for that.

you know, and there’s some risks to it for sure.

Dylan Silver (15:11)
Pivoting here, David, there’s a lot of folks who will talk about property management. I’ve heard people say that there’s little to no money to be made in property management, but then I’ve also spoken with property managers who are doing this at a huge scale and are very successful. And then a lot of people know the big names that are managing however many thousands of properties.

And so you’re vertically integrated as a developer and then also someone that’s doing value add. How important is it to keep property management in-house?

David Berneman (15:45)
I would say it’s exceptionally important to do so similar to what I was saying before about the construction side. It allows us to have control over all dynamics of the business. Now, to your point, you were just saying about whether or not it’s profitable venture or not. I mean, I can say we run our management business as a basic organic tool for the investment side of the business, right? It in and of itself is not a moneymaker for us, right? It’s just a service tool.

for our investments. And that honestly comes at an additional burden to us, to be honest, because we’ve got a staff of about 45 people, the majority of which are on the construction and management side. Our investment side of the business or asset management side of the business is just the few executives and two asset managers. If we were third-partying everything, construction management, property management, and so forth,

we’d

be much smaller operation. But, you are we able to better service those assets and really have better control of them by having all those things in house? Absolutely. I mean, just stories be told from some of my peers who have leaned on, you know, third party property managers in other markets. And that’s the other reason, by the way, why we don’t really go too far out of our region, right? We’re not we’re not out here buying in Virginia or or in Ohio, right? For us, we have to be pretty close to home.

in order to manage those processes pretty closely, right? We’re an hour flight away, very quickly can be in and out of a place like Phoenix or Vegas or whatnot. So, having that ability to handhold processes from the very top all the way down to the bottom is really crucial. I I personally have conversations with our maintenance techs that are at our property in Las Vegas, right? I’ll personally have conversations with

the various onsite managers or regional managers. And so will the entire executive team. So having that kind of ability to go up and down the flagpole on issues that touch directly to tenant concerns, the quality of the assets and what we’re doing, the overall strategic plan, I think it’s really crucial to have that all kind of integrated.

Dylan Silver (17:58)
We are coming up on time here. Any new projects that you’re working on and then as well anything you’d like to mention directly to our audience.

David Berneman (18:05)
Yeah, Dylan, we’re working on a couple of things that are interesting. Right now we, we restarted our single family spec development arm. were doing a lot of that back in 2013 to call it 2018, where we were ground up developers on spec single family here in Los Angeles. And so we restarted that, after the recent fires that hit, unfortunately in LA and the Palisades area and Alta Dena area. And so we created a new fund, specifically to rebuild in the Alta Dena pocket. And so, we were.

We’ve got five houses going as we speak and we’re looking for investors for that particular fund, which is growing. It’s interesting. It’s kind of taking us back to some of our roots. ⁓ then separately, we’re also working on the opportunities that are out there, I would say more so in the Vegas and Phoenix markets that are pretty interesting ⁓ with a lot of distress that we’re finally seeing.

We’re finally seeing that distress that everyone’s been talking about. Trust sales, receiverships, REOs, and we’re seeing a lot of really interesting

We just put an offer in on a deal yesterday actually in Phoenix that’s effectively a third of what it sold for just three years ago. So, you know, we’re trying to get back on the horse on the multifamily side and make some new acquisitions this year.

Dylan Silver (19:19)
David, thank you so much for joining us today. Thanks for your time.

David Berneman (19:21)
Thanks Dylan, really appreciate it.