A commercial real estate brokerage in the western suburbs of Chicago entered the affordable housing market, an asset class with strong demand and high barriers to entry.
Performance Real Estate Advisors, co-founded and owned by Dan Piatkowski, Neal Wolf, and Ryan Gallante, launched a brokerage firm that will specialize in selling affordable housing across the country. The firm of seven agents has specialized affordable housing real estate experience in Project-Based Section 8, Affordable Housing Tax Credits, Low-Income Housing Tax Credits and State Tax Credits, the brokerage said in a release.
The company’s clients include institutional investors, private equity firms, and nonprofits looking to capitalize on guaranteed rental income in which tenants pay 30 percent of the market rent and the government subsidizes the rest. The high entry barrier for brokerages, which requires the knowledge and experiences to work through the approvals from the state and federal government, make the industry profitable, PREA said.
“These properties stay fully occupied all the time, and rent is guaranteed more or less,” said Piatkowski. “It’s very attractive from an investment standpoint. There’s some upside opportunity outside that could be utilized for further returns that you don’t see in traditional multifamily real estate investments.”
The shortage of affordable housing makes it an appealing investment opportunity, especially as there is a shortage of more than seven million affordable homes for the country’s 10.8 million-plus extremely low-income families. There is no state where a renter working full-time at minimum wage can afford a two-bedroom apartment, according to the National Low Income Housing Coalition.
Limited inventory in the Project-Based Section 8, a government-funded program that provides rental housing to low-income households in privately owned and managed properties, and the redevelopment opportunities of tax credit properties have pushed up demand leading to multiple offers, Piatkowski said.
“I might have a deal for 100 units that I’m working on, and we’ll have 15 offers from the best investors in the country that are highly interested in a property if it’s located in a pretty decent area and has some upside opportunity,” he said.
PREA sees capital coming into the central part of the country, from Nebraska down to Texas, with investors coming from the Northeast and the West Coast.
“If you’re buying something in Oklahoma, or Kansas or Missouri in Texas, you might be able to get into something for $50,000 per door, said Piatkowski. “You’re able to really maximize your scale and the number of units you’re able to acquire in more secondary types of markets.”