Investing in Multi-Family Real Estate Relies Heavily on Manual Analysis. Solutions are Finally Coming to Market to Streamline this Process.
I love to cover areas of the real estate industry that are ripe for disruption. While there are nuances to every segment of the business, there are several themes that are present in most instances where disruption is just a matter of time. These include processes that require significant amounts of labor hours, tedious manual processes, many disparate data streams (or closely guarded data), and a huge TAM. Along with writing about industries that are primed for disruption, I love to cover early stage companies that are bringing innovative solutions to market that address these opportunities. It is way too early to crown winners, and the road ahead is filled with potholes, but these entrepreneurs possess the courage and fortitude necessary to modernize our way of thinking and unlock new opportunities for the rest of us.
Investing in Multi-Family real estate, as with all investing, requires a significant amount of due diligence in order to mitigate risk. The process that most real estate investors use is tedious, manual, and prone to errors. The data needed for an investment analysis is typically scattered across disparate systems, and then manually entered into Excel. All of the data needed to make informed decisions exists today, but the amount of time and effort needed to research each deal means that many great opportunities are getting overlooked, and only companies with large teams of analysts are finding the best deals.
Below is the current process that most investors follow:
Finding listed deals requires research across disparate forums (web, listing service, broker community, etc.), which is time consuming and manual. The process almost guarantees that investors do not see every available deal. Additionally, there are always “off-market” deals that are only known to a small group that have the right connections and existing relationships. These types of arrangements limit the amount of investors that are aware of these deals, and therefore lower the purchase price that may be achieved on the open market.
Underwriting takes place almost exclusively in Excel. Manual analysis on a per-deal basis requires a significant amount of data input and Excel customization to account for things like rent roll, unit count, and square feet. Additionally, data including projected market and rent & sale comparable data comes from various sources that are often unreliable and not pervasive.
Draft offers are manually written and sent via email. Disparate due diligence documentation is attached in multiple formats, making it difficult for the current owner to review, and even harder for the investor to track deadlines, diligence, and deal-related items. While an organized approach to this process is imperative to the success of every deal, managing several deals at once is time consuming, cumbersome and difficult.
Asset & Portfolio Management
Underwriting and valuation live in historic Excel spreadsheets, making it incredibly difficult and inefficient to track performance on an asset or portfolio level. It also makes it nearly impossible to track the performance of deals that the investor passed on (or didn’t win), which can hold the key to valuable lessons that can certainly pay off in future deals.
The TruLiv Story
Innovation in a legacy industry often occurs when entrepreneurial minded individuals become frustrated with the status quo. In January 2021, a team of three entrepreneurs, two of whom had recognized an incredibly inefficient process in their real estate careers, set out to streamline the process of investing in multi-family real estate by creating a platform to help investors through the entire deal cycle - from deal sourcing to asset management.
Nick Marino worked at several prominent real estate development and investment firms across the asset-class spectrum. Through the process of underwriting and pursuing sub-institutional multifamily assets, he was shocked to discover the fractured ownership and lack of data and technology in the space and he knew that there had to be a better way. Jeff Eigenbrood also had deep experience in the real estate industry, holding jobs that included finance, investment, and development for some of the largest firms in the industry, most recently with Irvine Company. Prior to that role, he spent 7-years at Fannie Mae and Ernst & Young successfully leading a $1B+ enterprise technology transformation effort. Rounding out the team, Peter Kutrumbos was a seasoned technology executive with 12 years of technology experience, including as former CTO of a Y-Combinator company. While Nick and Jeff both had deep roots in the real estate industry, Peter was able to bring a fresh perspective to the mix. Being new to real estate, his thinking wasn’t influenced by the way things had been done in the past. The management team’s unique skill set across the Real Estate industry positioned them well to solve real-world problems. Nick, Jeff, and Peter joined forces and launched TruLiv with the mission of redesigning the way that investors analyze deals, measure performance, and oversee the entire lifecycle of Multi-Family investments.
TruLiv’s mission was to create a complete solution to help Real Estate Investors throughout the investment lifecycle: From sourcing deals, underwriting & valuation, pipeline management, and asset management. Below is how they tackle each part of the investment process.
TruLiv gives users unparalleled access to the largest bench of deals by automatically sourcing marketed listings from multiple channels, and providing an inventory of all off-market assets within a specified metro area. These targets are overlaid with TruLiv's proprietary demographic, property, rent, and historic data to provide a complete picture of every multifamily asset in a market.
Underwriting & Valuation
TruLiv leaned on its institutional roots to build an underwriting model that allows your acquisitions team to underwrite properties in a matter of minutes, all while leveraging TruLiv's predictive data and analytics engine. This process is streamlined for even the most complex deals and is all exportable to a dynamic Excel model.
Transaction & Pipeline Management
TruLiv’s platform digitizes the archaic and manual transaction process from offer through closing. Their pipeline management tool ensures your team can execute effectively and efficiently throughout the acquisition process and provides a single source of truth on all prospective deals for the team.
Asset and Property Management
Dynamic monitoring of investment performance utilizing real-time market data and integration with property management software providers, TruLiv’s insights help investors adapt to market conditions in real-time. Their integrated investment model allows them to stress test and mark-to-market your entire portfolio in a few clicks.
As all startups can attest, even if you have the smartest people on the planet working to build a disruptive company, the true test is whether or not a customer is willing to pay for your service. Instead of trying to find a small company to adopt their early-stage solution, TruLiv went big and landed an industry powerhouse as their first partner: Coastal Ridge. Coastal Ridge is a 20 year-old industry leader with $3.3B in assets under management and a team of over 700 associates. Through a strategic partnership, minority investment, and customer relationship, Coast Ridge provided TruLiv the ability to perfect their product. Armed with a powerful proprietary platform, and some startup capital, TruLiv set their sights on a national expansion.
Investing in multi-family real estate involves archaic processes, and TruLiv appears to have built a solution to address these challenges. I wanted to learn more about their company so I reached out to the founders. I was pleased to find a passionate team of professionals that were laser focused on modernizing the industry by bringing solutions to market that can benefit all parties. The team was extremely generous with their time, and were happy to answer my questions.
Who is your target customer?
“Right now our focus has been on working with mid-sized multifamily investment companies who are looking for a better way to expand their portfolio. So often, we hear investors tell us that they wish they had the time to look at more deals. TruLiv acts as a force multiplier for smaller companies by revolutionizing their processes”.
Where do you see the biggest opportunities for your platform?
“In the near-term, we are very focused on providing a platform that takes the traditional investment process and brings it into the 21st century. In the last 10-years, we’ve seen Real Estate Technology providers make huge inroads into the Property and Investment Management space. They’ve replaced manual processes that were traditionally done in excel. The acquisition process, however, has really remained in the stone age. And that is where we see the biggest initial opportunity”.
Your value proposition is around saving your clients time, but how else do you add value?
“Data! It’s all about data! What we are doing on the data and analytics side is pretty incredible. We are primarily focused on the sub-institutional multifamily asset class, which is a space that is incredibly overlooked by investors and other data providers. We are building a dataset that is unique to this asset class, while layering in a whole plethora of demographic and market information.
All of that information is then cleaned, stored, and processed to ultimately help the user make the best decision possible. As time progresses, we believe that layering in machine learning and artificial intelligence will really begin to provide users with something that will make a difference not just in speed, but in finding and executing on the best deals”.
Is there a rule of thumb for how many deals an investor reviews for every deal that they consummate? How can TruLiv support investors so that they can find the needle in the haystack?
“Most investors will tell you that they only go after about one in every ten deals that come across their desk. The introduction of a pre-built DCF model for every asset in a metro area, both on-and-off market, is something that allows users to magnify both sides of that funnel. They can choose to do just the one needle in the haystack (1 out of 100 for example), but more often we’ve seen that our investors are able to move the 1 in 10 to the 10 in 100. This allows them to ultimately expand their portfolio the way they want to”.
You include Asset/Property management in the list of services that you offer. Do you compete with companies like Yardi and RealPage, or are your solutions complimentary to theirs? Do you currently (or are you planning on) integrating with other existing players in the market?
“This is a great question. We are not, and do not intend to offer property management capabilities. However, in terms of TruLiv’s ultimate goal of creating a platform that helps investors throughout the entire lifecycle of their investment, we do intent to introduce an asset and portfolio management capability that creates a huge amount of value for the user. We think the long-term value of TruLiv is in this asset management piece. Moving the acquisition process onto our platform means that all of that data, all of the information, those underwriting models, and more are already living in TruLiv. So when you become the owner of the asset, we can integrate with your Property Management software to make sure that you are able to market-to-market everything in your portfolio, or compare against underwriting in real-time. That’s something that simply doesn’t exist in the real estate space, and something we are doing better than anyone”.
What other information would you like to share with the market regarding TruLiv?
“We are Real Estate people solving real-world problems. Our mission is to help multifamily investors transform their process, and we want to help our partners and customers do what they do, but just do it better. We are not here to tell anyone how to price a building, or what buildings meet their investment criteria. We are here to make sure your real estate firm can succeed and grow, and in that sense our incentives are completely aligned”.
TruLiv is open for business! If you’re an investor looking to amplify your acquisition and portfolio management process, you can reach out to them at Info@trulivco.com.
Similar to what Rockval has done, but they offer every asset class. Great read!