I had the opportunity to speak at a family office retreat in Los Angeles recently, focusing on the nuances of real estate investing in the current economy. My interactions with various family offices and their advisors provided me with valuable perspectives and insights. Here's a summary of what I learned:
1. Rising Trends in Real Estate Investments Among Family Offices
It may seem self-promoting, but almost every family office I encountered is actively pursuing real estate investments, with a strong preference for multifamily properties. The Sunbelt region is particularly favored, while interest in California is more tepid due to its tenant-friendly regulations, which can extend eviction processes up to 12 months. Family offices are also scouting for distressed assets, though they do not shy away from stable, cash-flowing properties. A notable trend is that these offices tend to invest with familiar partners or within their own networks, valuing the relationship with the partner over the specifics of any deal or fund.
Why is this relevant?
Learning from entities that have accumulated significant wealth can offer strategies for enhancing your own family's financial growth. It's interesting to note that family offices prioritize a long-term outlook over immediate cash flow concerns, favoring strategies that involve buying, holding, and refinancing rather than quick sales.
2. Resilience in Economic Uncertainty: Family Offices' Approach
The absence of a recession this year can be attributed to three primary factors: a robust labor market with an unemployment rate below 4%, continued government spending that belies a recessionary environment, and sustained consumer demand. Although the largest tech companies, often referred to as the 'Magnificent 7,' drive much of the stock market's performance, some family offices are bracing for a slowdown but not a full-blown recession.
Why is this important?
Family offices tend to be more adaptable and willing to take risks compared to larger institutions, acting on logic and data rather than fear. The key takeaway here is to avoid letting fear govern your investment strategies.
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3. Key Investment Sectors for Family Offices
Family offices cast a wide net in their investments, spanning equities, real estate, venture capital, and more. There are, however, specific sectors that repeatedly catch their interest:
Industries linked to artificial intelligence, such as semiconductor manufacturing, as AI claims a growing stake in the tech sector.
Healthcare services related to aging, propelled by the increased lifespan and the subsequent need for preventive healthcare solutions, including treatments for obesity.
Renewable energy sources, with solar energy at the forefront, often driven by the environmental enthusiasm of the younger family members within the offices.
Why is this significant?
Many investors focus on the stock market, so understanding where these well-equipped family offices are directing their investments can provide valuable insights.
In summary, the retreat left me with a sense of enthusiasm for investment, particularly in real estate, despite current economic challenges. Family offices seem to embrace higher risk tolerances and place significant importance on their relationships with investment partners, rather than the particulars of any single deal.
As always, Be Bold, Be great, and Keep Pushing Forward!
Disclaimer: I am not a registered investment advisor. The content here is meant to share ideas and insights. Always consult with a qualified investment advisor or CPA before making any investment decisions.
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About Ellie Perlman
Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.
Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.