August 2, 2022

JF2891: Recession-Resistant CRE Investing ft. Kevin Bupp


Kevin Bupp began investing in real estate with the help of a mentor more than two decades ago at the age of 19. After saving up $7K to buy his first property, Kevin soon realized he needed to scale if he wanted to create significant cash flow. He acquired 150 single-family rental properties before venturing into commercial real estate. 

Today, Kevin is the owner and president of Sunrise Capital Investors, a boutique real estate private equity firm that specializes in acquiring and managing niche assets such as mobile home parks and parking lots. In this episode, Kevin discusses his experience as an investor during the economic downturn of 2008, how the experience changed his outlook on assets going forward, and how to avoid risky deals in today’s market.

 

1. Lessons Learned from the Great Recession

In 2008, Kevin had invested in properties in South Florida, where the economy had been heavily reliant on the construction industry. There was also significant oversupply in the market at the time. When the downturn hit, Kevin and his team faced major occupancy challenges and had to lower rents. 

“I tried to work with lenders that we had at that point and unfortunately, what I realized is that most banks — they weren’t prepared for this either,” Kevin says. “I had poor credit coming out of that, had no money, lost my personal residence, and it was just a very personally and financially challenging time, but I think it made me a stronger person both individually as well as professionally.”

 

2. A New Outlook

Prior to 2008, Kevin had always viewed himself as a cash flow investor; however, after the implosion, he realized that Florida had been a much more speculative market. Moving forward as he worked to rebuild things, he knew he needed to make some changes. First, he needed to make sure his properties produced actual, real cash regardless of vacancies and turnovers, and he needed to be honest with himself about the investor reserves he would need to secure that positive cash flow. 

He also kept in mind advice he’d received from his mentor: “No matter how bad a recession gets, there’s really only one thing that can ultimately make an investment fail, and that’s a debt load.” He now only buys assets that go through multiple, aggressive stress tests. Additionally, he keeps a very low leverage point — less than 60% across his portfolio. 

 

26 Real Estate Investing Types

3. How to Avoid Risky Deals

Kevin says the riskiest aspect to consider going into any deal is the sponsor, their level of expertise, and what their personal balance sheet looks like. Does their track record go back prior to 2008, and if so, how did they weather that storm? 

He also notes that thin margins coupled with the prevalence of floating bridge debt in the multifamily market add a level of risk. “Rents have seen a historical increase over the past two years, but there’s a certain point in time where tenants simply can’t afford it,” he says. “If we hit that ceiling at some point during that bridge period where they’re trying to execute on that business plan, then how does that impact their ability to tie perm debt on, or even exit out of that asset before that bridge debt comes due?” The answer will likely boil down to the expertise of the sponsor and their team.

 

Kevin Bupp | Real Estate Background

  • Owner/president of Sunrise Capital Investors, a boutique real estate private equity firm that specializes in acquiring and managing niche assets such as mobile home parks and parking lots.
  • Previous episode: JF 16: How to Amass a Large Portfolio, Lose Most of It, and Come Back Stronger
  • Portfolio:
    • GP of $100M+ in AUM with properties in 13 states
    • LP of:
      • 3,000+ multifamily units
      • 2 million sq. ft. of self-storage
      • 500,000 sq. ft. of medical offices
      • A dozen car washes
  • Based in: Clearwater, FL
  • Say hi to him at:
  • Greatest lesson: Passion is the key. Without it, ideas die before they have a chance to thrive, people don’t start their own businesses, and success remains a speck on the horizon.

 

 

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