Recoveries take a long time. Not like crises. A crisis may have been building up for a long time but very few of us have the insight to know it’s coming. It just happens – all of a sudden.
The 2008 “great recession”? The Lehman Brothers collapse was the first indisputable indicator, but of course the housing bubble and subprime mortgage crisis preceded it for several years prior to it.
The 2001 “dot com” crash? A big Nasdaq sell-off was our most visible indicator. Interest rates had spiked, business valuations were through the roof, because the internet was going to change everything.
“It’s different this time.” Famous last words.
Then how long before we recovered? It’s hard to say because recovery is gradual. You can fall off a cliff but you can’t spring back up again.
I started buying multifamily two years after the 2008 crisis. We weren’t out of the woods by any stretch, but the bleeding stopped, banks were getting their non-performing properties back on the market, and people were going back to work. It was calm enough for me to think we’re not declining any more. That was 2010 and by 2012 people were saying if you bought back in 2010 you were really smart.
No one was that smart, just aware of market cycles and willing to take measured risks.
What about 2025?
Technically we’re not in a recession but it has felt like it. Employment has been strong but interest rates are killing us. Who can afford to buy a house? Certainly not people in their 20’s, who are starting families and need stable places to live. Where is investment capital coming from? Not from people who sold a well-performing asset and are ready to redeploy the capital, because it’s very difficult to sell today.
If you agree that we’ve been in a downturn, it wasn’t one major calamity that started it. I recall 2023 and even 2024, listening to other investors, the mantra was “stay alive til 25”. But here we are, rates are high, and the only buyers out there are bottom feeders and grave dancers.
Do we call 2025 the year that the real estate market cycle hit bottom and started turning? Or was it 2024? Regardless, prepare for two to three more years of stagnation. Be a bottom feeder if you have the risk tolerance, because the rewards can be significant. But this economy may not be springing back any time soon.
Personally, back in 2010, I wish I had bought more real estate.
Market update
Lafayette Parish, Louisiana – it’s tremendously rewarding to discover areas of the county that are growing for all the right reasons. This area certainly meets that criteria. Most states have counties. Louisiana has parishes, a French colonial term that originated from the boundaries around church parishes. Lafayette Parish includes Lafayette but also several other nearby cities.
The first metric that jumps out is its population growth, 34% over the last 25 years, to 254,000 today. That’s pretty extraordinary considering Louisiana’s population has grown less than 3% total in that time period. Youngsville itself, a city in Lafayette Parish, grew from 4,000 to nearly 25,000. Carencro, another city in that area, has grown at an 8% annual rate over the last five years.
Several factors are in Lafayette’s favor. Being known as a great place to raise a family is up there but check the map. Interstate 10 from San Antonio to Houston runs through Lafayette on the way to Baton Rouge. That’s a major shipping corridor.
Employers include oil and gas, of course, but the bigger factor is its diverse economic base. The largest employers are organizations that don’t sink or swim with the market cycles. Healthcare is a dominant employer, then there are the usuals including the school system, University of Louisiana, Walmart, and a new Amazon distribution center. Not a single big employer to have to worry about, but a solid base of employers that won’t be going anywhere in the foreseeable future.
Looking at jobs growth, the numbers don’t tell a complete story. Bureau of Labor Statistics numbers cover the city of Lafayette but the Parish is considerably bigger. Jobs growth in just Lafayette has averaged 1.6% annually for the last three years. We like to see higher numbers for a market we want to invest in. With the Parish’s population growth being so high, we can estimate that jobs growth outside of the city is higher than in the city, quite possibly much higher. It needs to be to support this growing population. This is Louisiana. They aren’t moving here because of free handouts.
Lafayette Parish is the heart of Cajun country, also known as Acadiana. Its demographics trend to lower income so it’s not uncommon to see challenges in achieving rent and income growth for real estate investors. Housing costs exceed 46% of household income on average, higher than most regions in the U.S., a level considered cost burdened. Most of the housing and income challenges, though, center around the City of Lafayette. Its surrounding suburbs reflect a different story, where affordability is higher and job opportunities and income are growing.
If you’re looking for emerging markets, one of the top metrics is population growth. For Lafayette Parish, the other available metrics don’t paint a great picture but there is enough on the positive side to merit a deeper dive. Work with a data aggregator who can show details at the neighborhood level. Talk to the brokers. There’s a strong likelihood this vibrant region will get on the radar of bigger investors sooner than later.
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Finer Points of Multifamily Properties Your LLCs – you can lose everything if you mess them up
How secure your legal entities are can make or break your business. Do you have an LLC? More than one? Review them again. Now. And at least once a year. Keep them current, follow the rules and recommendations, and don’t procrastinate.
Okay, good advice, and we’ve all heard it, but what does it really mean. I’ll share a few key pointers, but I’m not an attorney or accountant so have these discussions with your professionals.
First, if you’re doing business, get an LLC. Not for taxes but to protect your assets. Even if you’re a private contractor like an Uber driver.
LLCs are state entities, not U.S. government entities, and they are treated differently in each state. How much your assets are protected can be different depending on the state you form the LLC in. I’m not going to tell you which state to use but you need to learn about them. Go to the websites or Youtube channels for attorneys who specialize in asset protection and learn about it.
Learn about charging orders too. They determine how much information about you the state can share if you’re in trouble and the other attorney wants to figure out what you’re worth.
Get an attorney to create your LLC, not LegalZoom and definitely don’t just go to the state’s website to form it. An attorney will provide you with a strong Operating Agreement, certificates, EIN, and guidance about the other requirements like registered agents and meeting minutes.
Here’s where this is critical: Something happens at your property. A tenant slips and falls, thinks there’s mold in the unit, a contractor thinks you did them wrong.
But that’s not all. Think of all the things in your personal life that could go wrong and cause someone to sue you. A car accident is one of the biggest reasons. Look at how many commercials are on TV for accident attorneys. The first thing they do when they decide whether to take a case is do a search to see how much you’re worth. Yes, that database exists. You didn’t consent to it but too bad, your information is out there.
If you were careful, maybe you took legal steps to hide your assets. Terrific, but they can still be found.
When the case goes to court, the judge will in most cases honor the protection that their state provided to your LLC. They will say it’s a business and the limit of the liability of this business is issues that were caused by the business, not caused by you personally, or of another business that you own.
A good attorney, though, will try to say your business didn’t follow the rules, didn’t do things it was required to do to maintain its status as a business. Then you’ve got problems and who knows how much of your other assets are exposed.
Take the time to learn the rules, because they are all very easy and very inexpensive. They just require you to be thorough. Extremely thorough. Have annual meetings and keep current and accurate meeting minutes, even if it’s just you. Have a business bank account and pay business expenses from the business bank account. Get a business credit card. Have only one property in your LLC. File your state documents on time, every year. There’s more but you get the idea.
Read the state requirements. Does one state seem to be more lenient? They don’t require so many of these burdensome tasks, your job will be easier, let’s just see what the minimum we have to do is.
Not the right answer!
Do it anyway. Just because a state doesn’t require all of these pieces to be in place to maintain your status as an LLC doesn’t mean you don’t do it. Think of these tasks as Best Practices. Do them anyway. Judges who will decide whether you’re protected or not in a lawsuit use their judgment, and judgment can sway one way or another.
Do everything that’s considered Best Practice when it comes to maintaining your LLC, and your chances of winning against an unfair lawsuit and protecting those assets that you worked so hard to build, go up.
“ Success is not measured by what you accomplish, but by the opposition you have encountered, and the courage with which you have maintained the struggle against overwhelming odds.”
― Orison Swett Marden, author, founder of “Success” magazine in 1897
Who We Are
Cardinal Oak Investments acquires, improves, and manages under-valued commercial apartments. We buy B and C class properties of around 100 units in the Southeast and Midwest.
We look for properties whose amenities, aesthetics, and appeal have fallen into obsolescence, whose care reflects tired management, and whose location is where a stable workforce wants to live.
And we partner with like-minded investors looking for stable assets that produce good cash flow and strong appreciation.
Founded and managed by John Todderud, Cardinal Oak Investments has acquired properties on both coasts and in between creating annual double-digit returns.
For more information, schedule time with me or send an email to john@cardinaloak.com.
Please note: Past performance is no indication of future performance.