What makes a promising real estate deal collapse in Northwest Arkansas? In this eye-opening conversation, Brian Wagers and Brandon Still unpack the five critical factors that can derail even the most promising investment opportunities in our rapidly growing region.
Location specificity emerges as the cornerstone of successful investing. We explore why treating Bentonville, Springdale, and Fayetteville as interchangeable markets leads to costly mistakes. From analyzing income patterns within specific radiuses to understanding street-level dynamics, we reveal the hyperlocal approach that savvy investors use to evaluate potential deals. Equally important are the region's infrastructure limitations – particularly sewer capacity constraints that have completely halted development in certain areas. This seemingly technical issue has profound implications for both developers and existing property owners.
The conversation takes a fascinating turn when we examine the unique market cycles of each submarket. Did you know Fayetteville's rental patterns differ dramatically from Rogers due to the university's influence? Or that Arkansas has become one of the highest insurance claim states in the country, driving costs to unprecedented levels? We provide practical guidance on underwriting for these realities, including preparing for potential 30% increases in taxes and insurance after acquisition.
Perhaps most compelling is our discussion of team structure and capitalization strategies. "The debt is sometimes more important than even the real estate," we observe – a counterintuitive insight that explains why otherwise solid properties fail in the hands of investors with inappropriate financing structures. Having experienced, boots-on-the-ground partners proves equally crucial in a market where many attempt to invest remotely.
Ready to avoid these deal-killing pitfalls and position yourself for success in Northwest Arkansas real estate? Subscribe now and join us as we continue to discuss all things investment in Northwest Arkansas.
Episode Transcript
Welcome to Northwest Arkansas Investing Podcast, your
go-to source for real estateinvesting in Northwest Arkansas.
Speaker 2 (00:13):
With your seasoned investor just starting out.
We bring you expert insights,market trends and practical
strategies to help you buildwealth through real estate.
Speaker 3 (00:20):
From buying and selling to property management
and long-term investmentplanning.
We cover it all so you can makesmart, informed decisions in
this fast-growing market.
Let's dive in.
Welcome back to NorthwestArkansas Investing Podcast.
I got Mr Brian Wagers here withme and we're wrapping up kind
of our short little series here.
We've talked through a coupledifferent things Market update
(00:42):
here in middle 2025.
We talked through someinvesting strategies that we're
seeing that still work in ahigh-rate market, and then we
wanted to kind of quickly hit onfive things that we see kill a
deal in Northwest Arkansas andreally how to spot them early.
So I want to pass it to Brianand let him kind of lead on some
(01:04):
of the things that we're seeingthere.
Speaker 2 (01:05):
Yeah, and so there's five things that will kill a
deal in Northwest Arkansas, butalso in any market, and we're
going to dive into why that'sspecific in Northwest Arkansas
but how it relates to really nomatter where you're at, listed
right here real quickly Location, infrastructure issue, timing,
(01:26):
taxes and insurance, sponsorship, team and capitalization.
So first, one location you knowthat's very specific to where
you're at.
So Northwest Arkansas, forexample, is the MSA.
Bentonville is one market,springdale is another and
Fayetteville is another.
(01:46):
So my thoughts there are thatFayetteville is not the same as
Bentonville.
Doing a deal in Bentonville isnot going to be the same as one
in Fayetteville.
They're going to have somesimilarities, but you have to
account for different things,different municipalities,
different things, differentmunicipalities, uh, different
businesses, um, different, umcapacities, which we'll go on to
(02:09):
.
Uh, that leads on to the nextpoint.
But also, within that, um, howclose are you to a major
employer in that market?
Uh, what is the averagehousehold income one mile from
my, from my potential site orpotential investment, with three
miles, what does that look likethree miles?
Does it go up or does it godown?
(02:31):
Or is it about the same whenyou go further out?
So I think if it goes down,you're probably in a highly
desirable spot if you're thecenter of where that higher
income is.
Um, for me that's what I'mlooking at.
And then location um, you knowyou, you have whole foods coming
(02:54):
in.
You have, um, are you going tobe right next to that whole
foods project?
Are you over here by, uh, ahotel or motel or manufacturing
plant?
So I I think the location isspecific.
But leading into our secondpoint of five things that kill a
deal, so number one, locationbe very specific on what market
(03:16):
you're in.
And that goes down to thestreet level know what's going
on around your street and inyour County.
Number two is infrastructure.
So that's actually leading fromnumber one.
We're seeing that a lot inNorthwest Arkansas
infrastructure problems.
That problems capacity.
I would say you know Center 10had max sewer capacity.
(03:38):
So if you were planning onbuilding a project, you know you
had some issues.
And there's some other areas upnorthwest arkansas that have
sewer infrastructure.
So, um, that can kill adevelopment deal.
Um, that's for sure.
So I would definitely be waryof there.
But now, on the other token, ifyou have an existing deal, you
know sometimes that can helpsupport your deal.
(04:00):
That means nothing else iscoming online in the area um
yeah, I would, and real quicklytoo.
Speaker 3 (04:06):
I would add the infrastructure issues or timing,
um, and some of these markets.
You know these markets withinnorthwest arkansas.
There's going to be differentrent cycles and different, uh,
leasing cycles, I mean, and so,um, you know, fayetteville being
one is catching the righttiming for students and and
everything like that, which maybe completely different to
(04:28):
Rogers, and Rogers, you know,leasing would be majority of the
year.
Maybe it's some portion of theyear where you know, some of the
larger corporations are movingpeople in.
And so I think, you know, withunderstanding timing of each of
these markets and what kind ofmakes them tick with the local
businesses, corporations, thingslike that, I think they're
(04:49):
definitely important and couldend up killing a deal if you're
buying at the wrong time oryou're not understanding these
little cycles within each.
Speaker 2 (04:58):
Next, on number three , we have taxes insurance.
This can really be expensesoverall.
You know, know, make sure thatyou know.
And and why I put taxes andinsurance with.
That's very specific tonorthwest arkansas.
You know you might haveconstructions costs going up
across the country, um, laborcosts, um, but taxes and
(05:20):
insurance is definitelysomething that would be wary of.
Are you underwriting for 30%increase after you buy the
property?
How is the county that you'reinvesting in reassessing those
taxes?
When are they doing that?
So I would be wary of those.
And getting insurance, I wouldmake sure you're getting a few
(05:43):
opinions on that too andaccounting for higher insurance
as well.
And then you know a rising tidelifts all boats.
So, as you know white, you knowwhite collar jobs become more,
more payable, so we're bluecollars and that that's
continuing need here.
And contract services, you know, from household to commercial,
(06:04):
um, you're going to see payrollcosts continue to increase too.
So I would definitely be waryon what you're paying.
And expenses today does notmean what you're going to be
paying expenses tomorrow.
So I would definitely accountfor all expenses to be going up.
Speaker 3 (06:20):
Yep, absolutely.
I mean, and one little note tothat would be Arkansas is within
, I mean, in the last few yearshas been one of the highest
claimed states insurance-wise inthe country, behind like
California, which is crazy.
So a lot of it seems like a lotof wind and, you know, storm
(06:41):
issues are starting to shiftthis way.
So, yeah, I mean that all willkind of result in insurance
costs in Arkansas and northwestArkansas as a whole to continue
to rise and so, yeah, make sureyou're aware of that.
Speaker 2 (06:56):
Number four this is especially true in any deal, and
that is the sponsorship teamand the partnership team.
So who is the one runningcalling the shots and maybe who
is that one or who's the team orwho are the partners on the
project?
So that is going to be superimportant and that can make or
(07:18):
break your deal.
As far as who's a quarterback,who's a running back, make sure
they have experience doing thekinds of deals that you're doing
, or they're partnering up withpeople that have experience.
What you're looking for,specific to that market we
talked about location, buthaving experience in a certain
market is important to havesomeone on your team that is
(07:42):
doing that.
So I think that's also whatwe've talked about in Northwest
Arkansas is what's advantage tous is being boots on the ground
investors here, because we dohave a lot of investors in
Northwest Arkansas that are notboots on the ground here, so I
hope they better be partneringwith someone that is, or that
(08:03):
someone is, the lead there.
Agreed, number five I have howyou are capitalizing that and
that is how you're structuringthe debt and how you're
structuring the partnershipaltogether as a side point, for
number four is how you'restructuring that.
You make sure you're spellingout rules and responsibilities,
(08:28):
but capitalizing it.
We talked a little bit aboutseller financing on the last
episode.
But what kind of debt are youhaving?
What kind of equity are youbringing in?
Are you having enoughcontingencies?
Do you have enough dry powderIf something is to go wrong, if
you need to hold it longer thanyou were expecting, if you have
cost overrun?
(08:48):
So I think that coulddefinitely kill a deal if you
didn't have enough equity thatyou thought you were going to
need and if you have too muchleverage not the right leverage,
absolutely.
So those are all points oncapitalization.
Speaker 3 (09:03):
Yeah, and I think this is a great one to wrap it
up, because I think this is themost important thing when it
comes to, I would almost say andthis might be a hot take, but I
would almost say the debt issometimes more important than
even the real estate.
Kind of, the way that you'restructuring that and you know,
especially depending on themarket, how you're kind of
(09:25):
aligning that to the property issuper important and can really
put you in a bad spot if you doit poorly.
So I think, continue to lean on, you know, continue to lean on
banking relationships andpartners in the local areas.
I think those are going to be,you know, just as much your
partner as as someone that'sbuying the deal with you and and
so, um, I just these are.
(09:47):
This is a great list and wewanted to kind of run through
this and knock through kind offive quick points of of what can
kill your deal, not only inNorthwest Arkansas but, uh, but
really across the country.
And so, um, I know these arethings that Brian has a lot of
experience in and in some of thebigger commercial deals, but
they also ran true to the smallmultifamily and single family
(10:08):
market as well.
So any closing thoughts on that?
Speaker 2 (10:11):
Yeah, location, infrastructure, taxes and
expenses sponsorship team andhow you capitalize it.
Speaker 3 (10:19):
To summarize it Love it so keep keep it in mind as
you continue to look for dealsin Northwest Arkansas and and we
appreciate y'all listeningHopefully this was a value to
you and listen to the lastcouple episodes.
We talked about some investingstrategies that that continue to
work in a in a high rateenvironment and then we talked
through kind of a market reportreally quickly on.
(10:41):
You know what we're seeing nowthat we're midway through the
year, so continue to stick withus and we've got some great
episodes coming.
We've got Tyler Overstreetcoming up next and we're excited
to talk through what's tohappen in Bentonville.
So thanks for listening.
Thanks, guys.
Speaker 1 (10:57):
Again, thank you guys for tuning in.
I'm going to go ahead and listsome sponsors off here.
We're going to start withWinstone Private Lending.
This episode is brought to youby Winstone Private Lending, one
of the top private and hardmoney lenders now serving
Northwest Arkansas.
Whether you need short-termcapital for a flip, a bridge
loan or creative financing,they've got you covered with
(11:19):
very flexible products to fitnearly any deal, including 100%
financing.
What sets them apart is theirdeep expertise, fast response
times and ability to thinkoutside of the box to help
investors like us close quicklyand efficiently.
If you're looking for a reallending partner, check out
Winstone Private Lending.
Link is in the show notes.
(11:41):
Our next sponsor is AdvantageTitle and Escrow.
They're a local company.
They do great work,specifically Kayla Phillips.
I can speak personally on thissponsor because I use Kayla for
all of my transactions.
It's been two, three, fouryears now and Kayla and I have
done a ton of deals.
We probably do between 65 to 80deals a year together and they
(12:04):
do a great job.
The SOPs, so systems andprocessing that they have over
Advantage Title is justincredible.
Clients love it.
They do a great job from startto end, communicating when I
give a deal to Advantage, titleand escrow.
I know that it's going to betaken care of.
There's no second guessing.
Advantage, title and escrow.
I know that it's going to betaken care of.
There's no second guessing.
(12:25):
I almost am able to treat themlike a second transaction
coordinator to my transactioncoordinator that I already have.
I know that they're going tohandle the systems and processes
correctly as an agent, as ahomeowner, as a buyer or seller.
They do an incredible job ofhandling a transaction and
communicating throughout theprocess.
They do a great job withcommunication, especially Kayla
Phillips over there.
I would highly encourage you ifyou're looking to close on a
(12:49):
home, buy a home, if you're anagent listening, to use
advantage, title and escrow,specifically Kayla Phillips.
So you're going to reach Kaylabest at 501-358-1601 or you can
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Kayla c-a-y-l-a atgoadvantagetitlecom advantage is
(13:12):
a-d-v-a-n-t-a-g-e.
Titlecom banks are aboutcommunity and Century Bank of
the Ozarks has been yourcommunity bank for 131 years.
That's over a century since1894.
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(13:33):
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Because they're locally owned,your loan approval happens here,
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Visit their locations inFayetteville and Mountain Home,
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Local bankers make localdecisions since 1894.
(13:54):
Member FDIC and Equal HousingLender.
If you enjoyed the show, makesure to give us a follow on your
favorite podcast platform soyou never miss an update.
Speaker 2 (14:01):
Don't forget to connect with us on Instagram,
facebook and LinkedIn for morereal estate insights and behind
the scenes content.
Speaker 3 (14:07):
Have a question you want us to cover, send it our
way, and if you're interested insponsoring the show, visit
nwainvestingcom to get in touch.
Thanks for listening and we'llsee you next time.
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