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For today's episode we bring back our returning champion Omar Khan, founder of Boardwalk Wealth, an investment firm focused on Class B acquisitions with value-add potential.

Recently, due to the run up in prices we have seen in 70's/80's vintage multifamily buildings, Omar has begun to contemplate alternate investment strategies, including ground-up development.

Today's episode\\xa0 is centered around this specific topic, as we try to shed some light on\\xa0 the question of "What makes more sense today, acquisitions, or ground-up development?"

The best way to reach Omar is through e-mail at omar@boardwalkwealth.com, as well as at Boardwalk Wealth's website, where you can register for Omar's newsletter.

Below is Omar's newsletter which spurred our conversation:



A great question to ask, when confronted with any claim:
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\\xa0"Compared to what?"
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\\xa0I was thinking of the risk profile of a new development. It's considered risky in general, but what comparisons do we have?
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\\xa0Well, the current market conditions are really frothy.
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\\xa0Let's take assets built in the 80s/90s. They are now trading at (or close to) replacement cost. This means that 30-40 year old assets are roughly selling for the same amount as the cost to build a new development.
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\\xa0These older assets typically have outdated floor plans with high maintenance expense. So they will require a huge investment, and ramp-up period, to make them work as attractive deals.
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\\xa0Compared to THOSE assets, a real estate sponsor can assume a similar level of risk in a new development. Once built, this new asset requires minimal maintenance. The old asset ramp-up period is comparable to the new development build.
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\\xa0But then the new asset is far more efficient on rent per square foot, as well as cost per square foot.
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\\xa0On top of this, residents in new build communities tend to have higher incomes. And they are able to withstand economic downturns (like a pandemic) better than residents in lower income housing communities.
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\\xa0So in that sense, the new development is lower risk.
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\\xa0Food for thought.
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\\xa0Let me know if you have a rebuttal or would like me to elaborate.
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\\xa0Omar Khan
Managing Partner, Boardwalk Wealth\\xa0