I was “LinkedIn peer-pressured” into buying The New Kings of New York by Adam Piore and started reading it this past week. For all you commercial real-estate nerds like me … it’s fascinating.
The book describes the origin stories of some of the top New York real estate moguls. Spoiler alert – some of the biggest started in affordable housing.
Why start in affordable housing? You can do massive projects with relatively little initial capital. The majority of the development costs are covered by government incentives and debt.
Our team recently interviewed Edd Hamzanlui, an affordable housing expert and Bullpen freelancer. Edd is a Vice President on Bank of America Merrill Lynch’s Housing Development team, working on tax credit investments around the country. Before Bank of America, Edd completed an MBA at Chicago Booth and held various roles in development, construction, and as a licensed architect.
Edd gave us some fantastic insights into the affordable housing industry (you can read the full article here). In addition to tips for starting an affordable housing investment business (which we cover below), the full article contains:
- Key players in the affordable housing industry
- Affordable housing trends (including top markets)
- Underwriting considerations
First – if you’re new here, subscribe to this newsletter. I send one weekly email on Sundays with content like this.
Tips for launching an affordable housing investment business
For investment firms considering moving into the affordable world, Edd has a few pieces of advice …
#1: Lead with the right hires
“Slowly start bringing people on board to start with,” he says. Hire expert executives in the sector to build an affordable housing department organically.” Bringing in affordable housing leaders instead of low or mid-level professionals will help kickstart your investment team and avoid pitfalls along the way.
#2: Leverage outside experts
Edd says that without deep (and local) experience in-house, hiring a tax credit consultant is practically a necessity. “Affordable is all about legal and accounting principles. You need to be working with established tax credit advisory firms even outside of the bank you choose to work with,” he says.
#3: Build a relationship with a nonprofit
Finally, Edd suggests partnering with an established local nonprofit on affordable housing projects. “They understand the neighborhood, culture, and community from the non-real estate side, which is indispensable for a successful project,” he says. In this way, you can focus on core investment competencies for your firm and outsource the potential weak spots.
Affordable housing is a specialized niche within multifamily housing but the impact of tax credits and other incentive programs can be massive for affordable investors and the industry that has spawned around them.