How to Identify Real Estate
Investment Opportunities
Finding rock solid investment opportunities is both an art and a science. The science is pretty straight-forward: we use robust data sets, proprietary algorithms, and rigid underwriting to evaluate each investment opportunity. And yet, even deals that are profitable on paper are not necessarily given the go-ahead.
This is where the art comes in. At Rastegar, we must firmly believe in both the micro and macro-economics driving the growth of an area before making an investment there. We put boots on the ground, talk with the community and local elected officials, and spend significant time getting to know a neighborhood before acquiring a site.
It is only when all the stars align that we move forward with a deal. In reality, we might only invest in 1% of the deals that we look at; we are always looking for that diamond in the rough.
Read on to learn more about Rastegar’s approach to finding investment opportunities.
How We Find Investment Opportunities
In our early days, as we were still building the business, we found most of our deals by cold calling asset managers and landowners. If there was a property that we saw, in a neighborhood that we liked, that met our investment criteria, we would simply pick up the phone and initiate a conversation.
Of course, having no reputation at the time, this meant that only occasionally would we get a call back.
Today, our ability to find deals and engage with property owners has drastically improved. Now, people come to us with investment opportunities, asking us to consider their deals.
For example, not long ago, one of the largest land brokers in the Austin area sent us a 680-acre master planned development opportunity. He came to us after reading about us in the press.
As our reputation has grown – and through our relationships with bankers, brokers, and institutional investors – the amount of information we are getting to look at off-market has become an avalanche. We have unprecedented access to deal information in the markets in which we’re active.
Deciding Where to Invest
Rastegar has invested in 38 cities across 13 states, so at first glance, it might seem as though we invest everywhere. While we will certainly look at opportunities in all markets, we prioritize those that are aligned with our investment philosophy.
Investing in the “Golden Triangle”
Our primary focus is investing in Texas’ “Golden Triangle,” which spans a 15- to 30-mile radius around Austin, between San Antonio and up to Waco. This is arguably one of the fastest growing corridors in the world in terms of economic growth and development. We fundamentally believe that there will be overflow from Austin going south, and overflow from San Antonio going north.
Moreover, we know this area personally. This is where we grew up, where we went to school, where we have raised our families. We have robust, long-lasting relationships in this region. Often, we find that we are only one degree of separation from the real estate decision-makers in this area. Through these relationships, the deals keep coming.
Going Beyond the “Path of Progress”
“The Path of Progress” is a term that is used loosely to explain where economic growth trajectories are headed. We have created some very interesting, proprietary AI systems to show us beyond what the path of progress would be in our target markets. In fact, we are often contrary to the path of progress. For example, we are currently targeting investments in the east side of Kyle, TX where the path of progress is on the west side; the west side is experiencing the most growth.
However, we believe that being adjacent to the growth can provide the best discount to a property’s intrinsic value. Then, we can invest in product that creates value given the proximity of the project to all the development happening immediately nearby.
Going beyond the Path of Progress is not new. Many investors did this by investing in Brooklyn or Jersey City instead of Manhattan. The key is being on the cutting edge, ahead of other investors who may later follow suit.
Following Corporate Location Decisions
Texas has more Fortune 500 company headquarters than anywhere else on the planet. Following these companies closely, particularly their space needs and impending location decisions, is another key area of our focus.
For example, we had a strong belief that the Gigafactory would be coming to a certain neighborhood within Austin. We had been reading the RFPs and paying close attention to what the company’s needs would be. There was a 50-acre parcel next to the F1 racetrack, making this a prime investment opportunity. The Gigafactory announced it was coming just one month later, which immediately boosted the value of our newly acquired site. Now, we are planning to build a 600,000 SF industrial park as part of the support system for the Gigafactory.
Tesla, Oracle, and others are moving their corporate headquarters to Texas. We look at these companies as being large centers of gravity; foresight and intuition help us make more informed investment decisions in line with what these companies may need – whether that’s industrial space or smaller, more modern office buildings with post-pandemic amenities like outdoor terraces. We plan for it now and are prepared for when the companies are leasing.
The Importance of Relationships
We like to say that “we’ve never done a deal with a computer” – and that is true. While software programs and AI will start to enhance our data collection and decision-making processes, at the end of the day, there’s a person behind every transaction. We take that to heart with all the investment decisions we make.
As noted earlier, before moving forward on a deal, we take time to get to know the locals. We walk the neighborhood, have coffee with community members, and really try to get a sense for that micro-neighborhood. Our commitment to getting to know these areas pays dividends.
For example, when we went through a rezoning process for our project at 1899 McKinney in Dallas, we met with 100+ residents, business owners, and elected officials. At the end of the day, they felt that we were doing right by the community. And when you do the right thing for the community, people want to do business with you.
Now, other landowners are calling us to see if we might be interested in their property. We take the calls, walk the land together, and then see if we can work out an arrangement that will be mutually beneficial for all – the owner, for the community, and for Rastegar and our investors.
There is a certain intuition about how communities should be built that goes far beyond a math exercise. Sometimes, the math works, but if the relationships do feel right, we take a pass.
Sourcing Deals Through Brokers
Some sponsors will tell you that they do not work with brokers. In our opinion, that is short-sighted. Brokers have access to and see deals that individuals would never be privy to on their own. Brokers have tremendous market intelligence. If we did not work with brokers, we would certainly miss out on opportunities. We invest in our relationships with brokers just as we do with individual property owners, business leaders, community stakeholders, and more.
Investing in Communities, Not Just Buildings
At Rastegar, we believe that real estate is a response to people. When people are migrating to an area, they need housing. When corporations are relocating, they need commercial and industrial space. This is why we are somewhat agnostic to product type; we believe in providing the product and the support that these centers of gravity need.
This is why, for example, we carved out 11 acres from one of our properties that we then donated to the town of Kyle to build a new elementary school. Not only did the community need a new school, but our research shows that crime near elementary schools tends to be lower than elsewhere in communities. Investing in a new school also helped elevate the socioeconomic level of people living in or drawn to that neighborhood, which results in lower crime and ultimately, increases our own property value. It was a mutually-beneficial investment that we valued as a steward of the community.
Conclusion
As you can see, there is no one method we use to find investment opportunities at Rastegar. At the core, neighborhood authenticity matters. We must buy into a neighborhood first and foremost; and when we do, we look to buy as many deals there as possible.
We do this by leaving no stone unturned. We leverage our existing relationships, particularly with brokers and our institutional investors, to source deals. We also try to make deals appear where nobody realized there was one before; we do this by deeply understanding an area and forging new relationships with property owners.
At Rastegar, we always have our eyes open and boots on the ground. Otherwise, opportunities will pass us by. Ultimately, we look at dozens of deals before moving forward on any one. Because even if a deal could make us money, making money is not enough. We believe in doing right be the community, by the asset, and by our investors—money is just one of those factors. Only when all of these factors align will we invest.
