Why Multifamily Investing Beats Flipping Every Time

Joseph Archbold (00:00)
Biggest challenge in 25 is that they’ve come off this horrible interest rate increase and a lot of big operators, even though they were doing the right thing and they were ⁓ mindful of the asset and ⁓ renovating and doing the things that they needed to do to increase rents and drive down expenses, they’ve caught, they’ve gotten caught in this horrible interest renters are moving in and getting six to eight weeks of free rent. If you’re investing in an asset and your time horizon is out three to five years, I think it’s gonna be a much different marketplace then.

Erika (02:02)
Hey everyone, welcome to the Real Estate Pro Show. I’m your host, Erika. And today I’m thrilled to be joined by Joe Archbold, a heavy hitter in the investing space. Joe, it’s so awesome to have you on the show today.

Joseph Archbold (02:15)
Erika, thanks for having me on.

Erika (02:18)
So let’s dive in, Joe. For those who don’t know you well, give us the rundown. How did you get started in investing?

Joseph Archbold (02:26)
I started investing around 2005. We bought a single family home. We thought we were going to turn it into a rental. Ultimately it ended up being a fix and flip. We were in a golf course community and it just, we had a plan and of course we had to pivot and modify that plan. And so that’s kind of how it all started. And ⁓ there were a lot of lessons learned as always. We, took too much time. We spent too much money. And when we were all done, we did okay on it, but it was a challenge for us. And so.

After that, we started to look more into the ⁓ multi-family space and that’s really where I ended up gravitating. I think more of my efforts to waiting a long period of time to get paid out was complicated for me. I was a big fan of cash flow, equity growth, and tax advantages. And for me, multi-family fit real well.

Erika (03:15)
What was the moment for you that you realized this was your lane and that investing wasn’t just a side hustle?

Joseph Archbold (03:23)
Yeah, so we bought a couple of small multifamily and ultimately built to about 30 doors. although it took a lot of time and it was taking a lot of time and attention, it was productive and profitable and was doing all the things that we had anticipated or expected real estate to do for us. So for me, it was one of those things that… ⁓

⁓ Investing in the stock market and putting my money in other places was complicated and always relied on somebody else. A 401k was a fund manager who was getting paid to move my money around and whether he was effective at it or not ⁓ was always a challenge. So ⁓ when I had a chance to deploy into real estate, ⁓ that’s really where ⁓ I think things clicked for me.

Erika (04:12)
Yeah, and I know that you do a lot of multifamily deals. How do you balance the risk of those and keeping cash flow steady?

Joseph Archbold (04:23)
Yeah, so initially mine were all buy and hold forever. So they were traditional loans. They weren’t very complicated to acquire. ⁓ Over the years, I got to know my market extremely well. All my assets were in essentially three zip codes. And so when we got to 30 units, they were all close in proximity. We knew where rents were at. We knew where rents were going. We knew what kind of renovation we needed to do to an asset to get it to a rent that made sense for us to want to keep it. ⁓

And over the years, if there was a small multifamily, anything from three to five units that came on in one of my markets, we either drove by it and looked at it. We saw it on paper where we walked through it and we bought it. And so,

you know, we got to 30 units and although it it became a pretty big undertaking. ⁓ You know, by the time we got to 2020, ⁓ things shifted a little bit more for me and I had the opportunity to join a broker dealer group.

And under a broker dealer group, we were able to look at a lot more assets, much bigger assets and really much more investable real estate, 200 and 300 unit kinds of multifamily assets that we could invest in and that we can point investors to and invest in. And 2020 was also the time that I think more than a million people migrated to the South and traded their squirrels for lizards.

really called the South their home. They weren’t gonna be locked down. They weren’t going back to work and it was a work from home atmosphere. And so it became a unique opportunity, I think, for everyone to look at the South as a place to invest and participate. And for me, all of my assets are in the suburb of Chicago. for me, was always about cashflow equity growth and tax advantages. And as I became part of a broker dealer team and understanding just what it looks like to be able to invest.

outside of my market as a instead of an active investor is more of a passive investor. I think my shift really went from just cash flow, equity growth and tax advantages to also include how do we de-risk this opportunity? How do we take some of the risk out of that as a potential investment? And then also having diversification. I can invest in Illinois, I can invest in Michigan where you’re at. I can invest across the sunbelt.

look at unique opportunities there.

Erika (07:35)
Joe, with you having a decade, over a decade of experience, you’ve seen cycles come and go. What would you say right now is the biggest challenge in the multifamily space?

Joseph Archbold (07:49)
Yeah, so for large operators, think

biggest challenge in 25 is that they’ve come off this horrible interest rate increase and a lot of big operators, even though they were doing the right thing and they were ⁓ mindful of the asset and ⁓ renovating and doing the things that they needed to do to increase rents and drive down expenses, they’ve caught, they’ve gotten caught in this horrible interest

compression and ⁓ it’s not gonna heal, I don’t think in 25. I just saw something that…

They’re looking at interest rates and say there may not be a interest rate reduction in 25 at all. So the South has had a lot of challenges recently that’s going to continue, I think through 25. If somebody sells an asset in 25, it’s usually because they’re turning the keys in and their interest rates hurt them as an operator and it’s been a tough ride for them. But I also think that as they get into 26 and we see some interest rates move,

It sounds, know, also through those years, there was a lot of build. So there was a lot of new assets that came on that has created a oversupply and that’s starting to ⁓ lean out a little bit. And I think the other challenges they have currently for the guys that are trying to move the needle, you know, there’s a lot of concessions. So

renters are moving in and getting six to eight weeks of free rent

the, they’re even starting to make any payments. So.

That’s probably the toughest part of the real estate right now, at least throughout most of the Sun Belt. And I think that’s gonna burn off and going 26 into 27 into 28 should be pretty interesting opportunity for investors.

If you’re investing in an asset and your time horizon is out three to five years, I think it’s gonna be a much different marketplace then.

Erika (09:38)
Joe, let’s talk about Anthem investing a bit. It seems like you guys have a strong focus on investor relationships. How do you approach building trust with capital partners in an environment where everyone’s bit more cautious?

Joseph Archbold (09:55)
Yeah, so as a broker dealer team, a syndicator has the opportunity to

raise capital on their own. They’re using their own money. They’re using friends and family money. They’ve also got prior investors that have invested with them in the past. ⁓ I think they see the opportunities out in front of them. And if they’re looking to acquire a large asset, they’ve got a short window of time to close that asset. And ⁓ if they’ve got renovation planned, that’s additional expenses.

So they’ll come to a broker dealer team like us to ⁓ raise that additional capital through our network of investors.

Erika (11:08)
Yeah, yeah. Yeah, totally. Now, I also wanted to ask you with all your experience that that you’ve had, like starting with flipping and now you’re, you know, you’re on the more passive side. Has there been a particular moment on your journey where a deal was very, very challenging or you you had to completely change what you were doing?

Joseph Archbold (11:08)
that answer your question.

⁓ You know, yeah, I think I have to say it was the first asset we bought. We thought we were going to buy a rental. ⁓ It was really arbitrage. It was off golf course community home and the homes on the golf course were selling at such a crazy Delta from where we bought this asset from. We thought we would turn it into a rental and in the market we were in it just it seemed like it made sense. We acquired it and then we quickly pivoted to really understand that it really needed to just be renovated and.

kind of bring up to a point where it really fit in the neighborhood. so we spent a lot of extra time getting it renovated and ⁓ really went through the challenges of really trying to figure out how to make it updated to a point where it made sense, but also make some money on the end and have it be our first fix and flip. ⁓ The challenge for me became ultimately we ⁓ were edging into 2007 and the economy was really turning on housing and ⁓ we literally

moved into that unit and put our house up for sale. So we had for sale signs in both yards, whichever one sold was where we were going to live. ⁓ So yes, that was ⁓ a ⁓ pivotal moment for me. And it really made me realize that doing a fix and flip and sitting on your money for such a long amount of time and not having the opportunity to cashflow, ⁓ it just really wasn’t my bag. Other guys are doing it and they’re doing it extremely well. I think, ⁓ you know, for me, multifamily and

and getting a check every single month and having equity growth, some tax advantages is really what I prefer.

Erika (13:09)
Yeah, going through that with that flip, what lessons from that do you carry with you today?

Joseph Archbold (13:19)
Well, first of all, my wife told me I could never do it again. But secondarily, just, you know, when we look at assets, I like to try to think of what other options do I have with that asset? ⁓ We’re in the process of buying a six unit in our market and ⁓ just, ⁓ you know, we’re looking at it. It’s a unique opportunity from where the rents are currently to where the rents could be. We’re looking at some unique things to do with it. ⁓

It wasn’t always an apartment complex and whoever renovated it for us, they’ve owned it forever. They’re guys in their eighties and they’re just ready to be done. And ⁓ it’s more of just a unique opportunity, a unique asset. So we’ve decided to take that on. And so I think looking at and approaching ⁓ any investment, if it checks the boxes for you, it ⁓ may or may not make sense. So when we talk to investors, it’s really looking at real estate as ⁓

Are you going to be an active investor or you going be a passive investor? Are you going to be responsible for the tenants, toilets, trash and turnover? Or are you going to be a passive investor and earn a solid risk adjusted return for your invested capital? I think there’s two different areas that you can participate as either a real, as a active or passive investor and neither are right or wrong. I do both. ⁓ And I think everyone’s got to weigh that for themselves. You know, how that, how that

looks for them or how they feel about.

Erika (14:48)
Yeah, that unit sounds really interesting. And I think you said you guys have 1,100 doors, which is impressive. Can you share

your due diligence process is like? Or do you have like a metric or are there certain red flags that you look for that you’re going to avoid that?

Joseph Archbold (15:49)
Yeah, that’s interesting. So if we look to de-risk an investment and we look at how we’re going to participate in that as a deal, we’re primarily working with very experienced operators that are already participating in a particular market. I wouldn’t pretend to understand the nuances and everything that’s going on in the Florida market. But if I do a capital raise or we do a project with somebody that’s already in the Florida market, they’re already manage, own and operate assets there for them to take on another two or 300 unit asset.

fits ⁓ their portfolio, ⁓ they’re managing it the same as they’re managing the one down the street. They look at it and maybe it’s an older asset that needs some renovation and they look at those renovations and they understand exactly what level of renovation they need to do to attract the highest amount of rent. So whether it’s hundred unit or two hundred unit building, they’re able to take that on and we understand that they know what they’re doing. It’s not their first time.

They’re not venturing into some market they don’t know and they’re not deploying some process that’s new to them either. you know, they know the type of asset, they know the market, their project and their plan to renovate the asset and be in and out of it in three-year timeline and commit to make certain returns to investors. That’s part of it. ⁓ Depending on the complexity of the asset.

We’ll use a third party financial analyst if it makes sense to really look at their due diligence and see how conservative their underwriting might be. ⁓ What kind of ⁓ rent rates are they anticipating and ⁓ where do they see their cap rate from their acquisition to their exit. So we’ll look at a lot of different things to really understand the team, the asset, ⁓ look at the entire project.

determine whether or not we want to participate in that and if we want to share it with investors.

Erika (17:49)
Yeah, yeah, for our listeners who are new to investing, what kind of advice would you give them, whether it’s their first deal or, you know, they’re just looking to get more deals.

Joseph Archbold (18:02)
Yeah, I would say ⁓ it’s really, first of all, are you interested in being an active investor or a passive investor? And ⁓ if it’s active and you’re looking to try to tackle something, then it’s figuring out the next steps for you. If it’s getting with a broker that can share stuff in your market or some other market that you want to affect and participate in. If it’s a passive investor, then there’s a lot of ways to really truly understand how to participate as a passive investor. For us, passive investing, you become a limited partner and you

you co-invest alongside the general partner who’s running the project. And it’s pretty straight, I think it’s pretty straightforward. There’s obviously due diligence on the front end and then to try to determine, you know, does this type of asset fit your profile for risk? And then does it also fit your portfolio from the aspect of ⁓ how much real estate do I have in my portfolio? Am I gonna use my 401k money and self-direct that into an asset or?

Do I have capital set aside that I could affect and push into a project like this? Most of these projects, I’d say 90 % of them are kind of a three to five year kind of timeline. Can your money be illiquid for three to five years? ⁓ And obviously I would tell anybody if they want to talk about real estate to reach out to me and I’m glad to chat anytime about active or passive investing and if I could help somebody short circuit their effort, I’d be really glad to do that.

I think along the way we tripped over a lot of stuff and there’s a lot of things that we wish we’d have done differently or I think I would have gotten into passive investing much sooner and been able to sit down a little bit more and relax.

Erika (19:39)
Now, with you being involved in active and passive investment, was that more intentional or accidental that you kind of do both today?

Joseph Archbold (19:53)
I think for me I do both because it’s an opportunity, right? So like I said, I know my market, I know what’s happening in my market and how to participate in the stuff that I want to participate in. And if we’re selling an asset and we’re buying an asset, ⁓ I’ve had most of the stuff that I own now, I’ve had long enough that we’ve got a lot of equity built into it. So it’s trying to affect that and redeploy that or leverage that to do something different.

I really look to passive investing as a really ⁓ clean path to participate in real estate. People can get involved in REITs and they can get involved in real estate a lot of other ways, but I think many of those still have exposure to the stock market. And I think more and more people are looking outside of the stock market and avoiding some of the whipsaws that are happening on a day-to-day basis in the stock market. And investing passively. ⁓

as a limited partner gives you that ownership piece that will drive cash flow, equity, and some significant tax advantages.

Erika (21:00)
Yeah, yeah, totally. Joe, what would you say is next on the horizon for Anthem investing and how are you planning to tackle that?

Joseph Archbold (21:11)
Boy, you know, that’s an interesting thought. We’re looking to continue and grow. if it’s continue to keep all that active stuff that I have or ⁓ eventually migrate more of that away and participate more on the passive side is probably where I think my direction would be. We’re gonna continue to look at ⁓ operators and determine how we partner with them and.

know what their projects look like and ⁓ we’re seeing we’re seeing more and more stuff ⁓ in multifamily. We’re seeing some unique stuff in the industrial commercial space and then we’re seeing some unique alternatives that are outside of real estate that ⁓ we’re sharing with investors that might have an appetite for that and you know we’re participating alongside them in some of those.

Erika (22:05)
That’s exciting, Joe. Before we let you go, if someone wants to connect with you, learn more about Anthem Investing, or maybe even explore a deal together, what’s the best way to reach you?

Joseph Archbold (22:17)
Yeah, the best way to reach me would be to straight away at my email, joe at antheminvesting.com. ⁓ We’re in the process of building out a landing page, Grow Income for Life, that may be up in the next few weeks. You can certainly try and it’ll be a place to tag and we’ll have some things that we’re sharing there. Yeah, yeah. I think reach out directly would be the best way.

Erika (22:44)
Great, Joe, this has been awesome. You’re focused in the industry. You’re very disciplined and what you’re doing is exciting. And I know our listeners love the insight today. Thank you.

Joseph Archbold (22:57)
Thanks, Erika, thanks for the time. Super nice to meet you.

Erika (23:01)
Same here for everyone tuning in. If you love this episode, make sure you’re subscribed to the Real Estate Pro Show. We’ve got more conversations coming up with heavy hitters like Joe who are building empires in the real estate space. We’ll see you on the next episode.