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Lessons from Tiger 21: How Measuring Risk In Student Housing Opportunities Leads to Asymmetric Returns

student housing opportunities

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Alix has been involved in real estate, construction and development for the last 20 years. He started his career in Colorado founding his own high-end construction company and grew it to be the largest and most successful firm in Southwest Colorado.

Shortly after starting his own building company in 1999, Alix started investing in real estate with single family spec homes, single family rentals, commercial and multifamily rentals. Over the last 15 years, Alix has successfully completed several townhome, mixed-use and single-family developments!

Alix has been an entrepreneur his entire life. He shares the principles of how he’s built and managed multifamily properties, single-family homes as well as commercial buildings for over 20 years now with the goal of growing.

He has broad based experience and knowledge of multiple real estate asset classes and is focused full-time on growing his private equity real estate firm; Ashland Capital. He uncovers the benefits of investing in student housing asset classes and walks through the details of developing success in this opportunity.

Alix concludes by giving out the wisest advice to our listeners by emphasizing the importance of measuring risks. Tune in to this episode and you’ll be sure not to lose any secrets about investing with success!

In This Episode

  1. Kogan’s background and how the real estate journey started for him.
  2. The development of Ashland Capital and where it’s heading today.
  3. The spike, demand and the details of the Student Housing Asset Class.
  4. Alix’s perspective on the current market climate.
  5. Alix’s personal & professional wealth strategy advice.

Jump to Links and Resources

Hey everyone, and welcome to today’s show on Wealth Strategy Secrets. Today, we’re joined by Alix Kogan. Alix has been involved in real estate, construction, and development for the last 20 years. He started his career in Colorado, founding his own high-end construction company and growing it into the largest and most successful firm in Southwest Colorado. After 20 years, Alix had a successful sale and liquidity event in late 2019.

Shortly after starting his own building company in 1999, Alix began investing in real estate with single-family spec homes, single-family rentals, commercial, and multi-family rentals. Over the past 15 years, he has successfully completed several townhome, mixed-use, and single-family developments. He currently has over 1,700 apartment units as an LP, Co-GP, and KP. He also self-manages his portfolio of single-family rentals, as well as a small portfolio of commercial properties. In addition, Alix invests in and owns a substantial portfolio of mortgage notes.

He has extensive multi-family experience in building, owning, and managing assets. With broad-based knowledge of multiple real estate asset classes, Alix is now focused full-time on growing his private equity real estate firm, Ashland Capital.

Alix, my friend, welcome to the show.

Thank you, good to be here, Dave. Hearing you read that reminds me I need to update it—it’s grown substantially. But anyway, glad to be here, Dave.

Yeah, it’s funny with a lot of high-flying entrepreneurs that we’re always working with and in circles, the resume changes infinitely every 90 days. A lot of people in this space have big aspirations, making big things happen like yourself.

Really excited to have you on the show. I think investors are going to enjoy this perspective, and it’s been a pleasure getting to know you over the past few years. Some of our investors have also had the opportunity to invest with Ashland Capital on one of the projects.

Can you tell us a little more about your background and how it all started? How did you get into construction and real estate from the beginning?

Sure, well, I grew up in a very entrepreneurial family. My dad was a builder and developer, my brother is a builder, developer, and investor, so I just grew up around it. I actually thought I was not going to follow in the family footsteps and was going to save the world.

In my early 20s, I had a stint of traveling the world as well as teaching high school, and that was going to be my path. I wanted to coach soccer, teach high school, have my summers off, and thought that was going to be the perfect life. I was a little naive, a little young and dumb. Not that it wasn’t an admirable goal, but reality set in.

There I was, teaching and making $26,000 a year. I had my summers off but no money to live on during the summer. The light bulb kept going off—was this really right for me? The biggest decision point for me was realizing I actually did not enjoy teaching. I enjoyed the interaction with kids and coaching, but I didn’t enjoy just cramming information down their throats.

In 1998, I decided to quit teaching and moved to Durango, Colorado, a little town where my ex-wife and I had vacationed and thought would be a great place to settle. I looked around and thought it would be a good place to go back to my roots—construction, development, and real estate.

I went to work for a builder for about a year, then started my company, and it just took off. We doubled in size every single year for many years. I always lived below my means and was really successful. All the capital and profit I made, I put right back into real estate. That’s how the journey started.

Great, and what were you actually doing when you started with that construction company? What was your role?

The company was design-build. I always had a strong affinity for design and construction, given my background. We designed and built high-end custom homes. Durango primarily consisted of second homes—vacation homes. These were your typical mountain resort-style vacation homes, and that’s what we did.

I started small. It was just myself and an employee and a half. Fast forward to when I sold in 2019, and we had grown to about 60 employees. It was vertically integrated—we had architects, designers, carpenters, construction crews, superintendents, admin staff, and more.

We also had a development arm of the business where we would develop small multi-family, mixed-use, land development, and single-family projects. It was both a custom home business as well as a development and speculative business.

The third leg of that whole stool was my personal wealth, which I plowed back into acquisitions—buying rentals of all sorts and sizes. Around 2017, that was really the shift and pivot toward what Ashland Capital is today.

Right, which is maybe something you could share a little bit about in terms of Ashland. What would your focus be on—your markets, your niche?

Sure. In 2017, I realized that I did not have to own real estate in my backyard. I could buy larger assets around the country and hire third-party property managers. Prior to that, we self-managed everything I owned in my portfolio. It was not syndicated and was all my own capital. The whole concept of syndication—structuring it where you can partner with limited investors, buy larger assets, and hire best-in-class property managers—was new to me in 2017. But that’s where it started.

I started investing as an LP and helping guys who didn’t have the net worth and liquidity as a KP. I also partnered with others as a GP, assisting with a number of different things. That was the early stage, and quickly thereafter, I realized this was something I understood and could manage. I then became a lead sponsor, focusing on two verticals—100-plus unit multifamily properties around the country and student housing.

For student housing, we buy a minimum of 100 beds. Student housing, of course, is sold and run by the bed rather than by unit or door.

Yeah, interesting. We’ll jump into more about what you’re doing in the future, but I also want to ask—what is your personal wealth strategy?

On this show, a lot of what we talk about is really the process of building wealth. It’s not about one particular asset or ROI, but about having a strategy. I know you’re a member of Tiger 21 and have had great success, so help us share with the audience a little bit about your strategy.

Strategy changes as you get older. My strategy now is different from what it was 10 years ago. Back then, I was taking more risks than I do today. That was what I call the “building years”—building net worth. I’m still building, but I’d say I’m now in the second phase of my career, where I take less risk.

For me, it’s all about risk-adjusted returns. Everything I do today is analyzed through three lenses—worst-case scenario, best-case scenario, and base-case scenario. Since I have a limited number of hours in the day, a certain amount of capital to deploy, and investors whose capital I need to protect, every decision is a measured analysis of those factors.

Simply put, I’m not aiming for home runs with real estate or most investments. On occasion, I’ll allocate a small portion of my net worth to something with high upside potential, like blockchain or crypto. We all know how volatile that space has been, which is why it remains a very small part of my portfolio. If I lost all of those dollars, it wouldn’t change my life. It’s fun, interesting, and something I enjoy playing around with. Even though that part of my portfolio is down right now, I’m not selling—I believe in the space as a long-term play.

When it comes to evaluating opportunities, I focus heavily on after-tax returns rather than pre-tax. I want to make sure that what I’m doing is tax-efficient—ideally benefiting from long-term capital gains and opportunities like real estate depreciation to defer taxes. That is a major factor in how I allocate my investments.

Yeah, absolutely. So, what do you like about the student housing asset class? Talk about some of the attributes that made you gravitate toward it.

Sure. I got my start in student housing in Colorado and realized that I liked the student housing population—aside from the fact that they can be a little rough on the asset, as you can imagine. I was the same way when I was in school. But I always had success.

Back then, I owned college rentals, though it wasn’t even called student housing at the time. The institutional, professional student housing asset class has only been around for about 20 years. Before that, it was mostly mom-and-pop landlords owning single-family homes, duplexes, and small apartment buildings. There wasn’t much institutionalized student housing. I had rentals and found them easy to manage. Believe it or not, I thought dealing with college students was pretty straightforward.

Over the last four or five years, I’ve moved into institutional-level student housing assets, and I like them for multiple reasons. First, there’s a higher barrier to entry. Not every investor or multifamily operator is going to invest in student housing—it’s more of an operational play, requiring expertise. That means there are fewer players and less competition, which we like.

Second, it’s a counter-cyclical asset class. During economic downturns, college enrollment often increases as students go back to school or stay longer. Right now, we’re seeing record enrollment and rent growth. Not every campus is experiencing this, but the ones we focus on are performing very well. In fact, 2008 and 2009 were some of the best years for student housing.

Another key advantage is parental guarantees. This keeps delinquency rates much lower than in conventional multifamily properties. I also like the diversification—it ensures I’m not putting all my eggs in one basket with just apartments. Allocating some of my portfolio to student housing adds balance.

We have deep expertise in this space. A close friend and partner of mine in Chicago is one of the top student housing property managers in the country. He runs a small, boutique firm and has been in the industry for 25 years. Every one of our assets is significantly exceeding pro forma expectations. It’s an asset class we’re comfortable in and where we’ve had great success.

So, how about in terms of the pandemic, right? Weren’t there a lot of students who dropped out, right? And you had some vacancy there?

Great question. There is just a generic view of exactly that, but that’s what happened—it sort of happened, but not really. So what happened is when the pandemic hit, kids actually—some kids did not want to go home. In fact, many kids did not want to go home because they didn’t want to sit in their parents’ house or basement. They wanted to be around other kids and stay on campus, so a lot of kids did stay on campus.

Some of the ones that went home and actually did distance learning, whether on campus or back home with mom and dad, continued to pay rent because of what I just mentioned—parental guarantees. So if your parents are guaranteeing your rent, your parents are likely middle to upper class. They’re going to make sure they keep paying rent—I mean, you’re obligated, obviously.

So while vacancy was higher, no question, delinquency was not that much higher than typical because kids continued to pay. So that was the initial reaction to the pandemic.

Fast forward to us coming out of the pandemic, more or less, what we’ve seen is a huge spike, an increase in demand for off-campus housing. So parents realized—do I want my kids sharing a small dorm room and then sharing a bathroom with 10 other kids or 20 kids? No, I want my kid to have their own bedroom, their own bathroom, more space, outdoor space, potentially even a balcony.

So coming out of it, we’ve seen incredible demand for what we do, which is off-campus private housing with equal bed-bath parity. So every student has their own bedroom, and they have their own bathroom, and that’s been in huge demand.

Wow, that’s—yeah, that’s interesting. I wouldn’t have thought about it that way. And then, what would you say in terms of, again, people who are kind of new to the asset class and everything? Probably the biggest knock or something that you could think of is college students, right?

So, are they destroying your places? I mean, how does property management really go with that?

Sure. So, it goes back to operation. There are some property managers that, come July or August, as students are vacating units—either moving out, going home, or graduating—that’s when they inspect units. And they say, “Oh gee, well, somebody did XYZ. They owe me a thousand bucks, two thousand bucks,” or, “It’s fine.”

We don’t wait. We actually inspect them on a quarterly basis. So, as damage is occurring, we’re fixing it and charging the students. It’s not a big problem at all.

In fact, oftentimes, we’re getting 60 to 70 percent of our turn costs—meaning the cost of getting units ready, touch-up paint, cleaning, etc.—covered through chargebacks. So, we’re charging back the students and their parents for anything beyond normal wear and tear, like a ding in the drywall.

Long way of saying, Dave, it’s not an issue. It’s built into the business model. Not a problem.

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Good. And then, how do you address—do you really have a gap in that vacancy during the summer months, or is that filled through summer school and things? How does that work?

Well, 12-month leases.

So, 12. Okay.

We only do 12-month leases, with the exception that, let’s just say we got to 97% occupancy by July or August, something like that, and we have a handful of vacant units. We will backfill them if there’s a need for a short-term lease—where it might be a six-month lease, maybe first semester, second semester, or what happens—but you know, we’re going to drive to at least 95% occupancy with 12-month leases.

And that’s the norm in any kind of institutional-grade student housing.

Nice, I remember being on the other end of that—writing the check and signing over the lease for my daughter on one.

So, yeah, I mean it does seem like your bases are really covered, right? Because you know you can charge the students, you have your parents backing their lease agreement, and they seem to be quite aggressive in terms of managing any delinquencies and things like that.

So, yeah, the other nice thing about student housing is it’s a lot more turnover, which somebody might think about as a negative, but the positive of that is every year you have an opportunity to raise your rents. It’s harder to raise rents for people that are renewing, but for new leases, of course, it’s much easier. Yeah, because you’re just reacting to the demand in the market.

Right, and are there any particular markets that you’re focused on? Does some of that vacancy really—is it dictated upon, you know, the market or the university that you’re actually in?

Yeah, that’s the key to every investment, whether it’s multi-family or student, but especially in students. Very important to know—is enrollment growing? What is the health of the school? What’s going on at the school? And then, the supply and demand.

And where are you within sort of all the different asset classes? I mean, you have C, B, and A type of student housing. You could be, you know, core asset, made on main, pedestrian to campus, so you have to understand where you are. But all of that is based on supply and demand.

For example, you can have a school like Texas A&M College Station where, you know, it’s a great school, enrollment is growing, but all of a sudden, the supply just floods the market, and then everybody’s lowering their rent so they can compete. Schools do go through a cycle of that. You just have to be very careful that you know where in the cycle they are and where you are within all the different asset classes.

So, it’s like anything—you have to understand the data and make a good decision.

Yeah, absolutely, and that brings up a good point. You and I have had several conversations this year—interest rates, cap rates, inflation, and everything. I know you were on a panel speaking at the recent conference, so can you share your current perspective on the market climate and what you’re seeing?

Yeah, I think it’s an interesting market. I think it’s a market that’s trying to sort of find its legs and figure out where we’re going, so it’s definitely in transition. The biggest issue, of course, is the debt market. We’ve got much higher costs of capital, and sellers just haven’t reacted to that.

Either they still think they’re sellers but are wanting six-month-old pricing, and obviously, we’re not going to pay that. So that’s where we’re trying to find this equilibrium—where pricing is today and getting sellers to understand that this is the reality and they need to sell for today’s prices.

Some sellers are just going on the sidelines, and that’s a smart thing to do. We are not. We’re selling an asset in two weeks, believe it or not, for an insane price. We found somebody that is extremely aggressive and bullish on the market. We don’t think that if we held it, we could ever get to the rents they predict they can achieve. We’re going to sell.

But if you don’t have to sell—which, let’s hope you don’t—you shouldn’t sell in today’s market. We see it as an opportunity. There are plenty of people who have to sell. They may have a loan expiring, they may have floating rate debt, or they may be in a negative cash flow situation where they need or want to get out. We think that’s the opportunity.

Some buyers are also on the sidelines, just kind of a deer in headlights, wanting to see what’s going to happen with the recession. We’re confident in the asset class. You just have to buy right—buy in the right MSA, and it has to be the right opportunity.

So we’re looking and making offers every day. First law of real estate, right? Buying right from the start.

Absolutely, yeah. So do you think maybe next year, buying opportunities could be a little better—maybe in the next 12 months or so?

You know, I tend to think that the best buying opportunities come when there’s the most uncertainty and distress. So I don’t know how long that sentiment will last. I think as we gain more clarity on the economic cycle and the recession, people will actually have more confidence.

I think pricing will increase, and we’ll see more volume as that happens because sellers will come off the sidelines and want to sell. If the debt markets level out a bit and people understand where they stand—I don’t think rates will drop back down to two and a half or three percent, but if they settle around four or four and a half percent, and we know it’s stabilized—then I think you’ll see more transaction volume.

But to find the deals, you have to find them in a distressed situation, and I think that’s happening right now. So I believe the next three to six months will be a great buying opportunity.

 

Nice, very well said. So shifting gears for a sec, Alix—you’ve obviously achieved a great deal as an entrepreneur. What is the one biggest thing, from a personal development perspective, that you could share? We have a lot of entrepreneurs on the show—what has helped you achieve success?

On personal development, I’d say I’ve had great success with either a strong team or key individuals who have been invaluable. They’ve always been a great sounding board and offered perspectives I might not have considered. I’ve been very fortunate to have a great team. My CFO, who’s been with me for 18 years now, is still with me at Ashland Capital. He started with me in Colorado, still lives there, works remotely, and has been outstanding.

In addition to that, groups like Tiger 21 and Strategic Coach have been incredibly valuable. You only know what you know, and being able to learn from mentors, friends, and successful entrepreneurs is invaluable. Even when I had my construction development company, I was part of a group called Builder 20—20 of the top builders across the country. It was like having a personal board of directors. They had full disclosure of my financials, personal life, and professional life. I could meet with them twice a year or pick up the phone any day to ask for advice.

If you can surround yourself with those kinds of people, I think that’s the best personal development move you can make. That’s more business-focused, of course. On a personal level, I’ve gone in and out of practices like meditation. I’ve been really disciplined with fitness and nutrition at times—and other times, not so much. I’ll admit I’m in one of my “bad phases” right now, and COVID certainly set me back. But those things are key for me as well—having a clear mind, good state of mind, and overall health and wellness.

Yeah, it’s really the foundation to whatever it is you’re doing, right? If you don’t have that as the basic building block, it’s hard to achieve a lot.

And I totally agree in terms of the people—you’re really a product of the five people you spend the most time with. Being involved in some of those mastermind groups is key. Actually, I didn’t realize you were in Strategic Coach! I’m going on five years now myself, and it’s been such a phenomenal program, completely structured for entrepreneurs trying to scale businesses.

Just getting that feedback, sharing ideas—because most of the time, people tell us we’re crazy for the things we want to accomplish as entrepreneurs. But that’s a group that really encourages you and asks the right questions. It’s all about asking the right questions, really.

So that’s great. If you could give us just one piece of advice for investors trying to accelerate their wealth journey, what would it be?

I guess I would say really figure out—are you a limited, sort of passive investor, or are you an active investor? I think people who try to do a little too much of one or the other relative to where they are in their lives and their other businesses can really be affected by that.

So, you know, I see a lot of people who have a day job, and then they’re trying to have a lot of side hustles and businesses. I think that can be a little dangerous because you’re not focused. I mean, I think you and I have talked about that—there are a number of real estate syndicators where it’s a side hustle. They have a day job, and they’re syndicating deals.

Personally, I would never invest in someone where it’s a side hustle and they’re not full-time. So from an investment standpoint, I think you have to look at things through the same lens. If you have a day job, if you’re busy—find the right sponsors. I always bet on the jockey first—that’s number one. It’s the sponsor. Then I look at the asset or the business plan second.

Because you can have a great investment but a horrible operator, and you’re going to get in trouble. But if you have a great operator and an okay investment, generally, that’ll work out better for you.

Right, yeah, no, completely with that. I mean, this is a people business—it’s all about the people. The numbers can present one thing, and I tell investors that as well. It’s kind of counterintuitive, right?

Because if you find one deal—let’s say one deal is an 18% IRR—is it better than the deal that’s a 15% or 16%? On the surface, people might say yes. But, you know, it’s all about that team because they could actually double it or triple it—you never know. It’s all about actually executing the business plan and exceeding that.

100%. I can’t tell you how many times we’ve had investors say, “Oh, I like your deal. It’s a 16% IRR, but I’m looking at another deal that’s an 18% IRR.” I always say, “You’re looking at the wrong thing. Look at the sponsor.”

And that deal—the one I just mentioned that’s going full cycle in two weeks? We’re going to return a 33% to 35% IRR. And if I wanted to be a little brat, I’d call that guy and say, “Right—that’s what you passed on in 2016.” You get my point.

Absolutely. So, speaking of people again, I think this is really cool, Alix, that you’ve done. You actually started your career, like you said—you had the family business that was entrepreneurial and in the construction industry. And you’ve brought your son into the business as well, who’s—

He’s actually not my son! So, Eric is my nephew. But you’re not the first one to assume that he’s my son because he’s 25–26 years younger than I am, so he could be my son. But Eric is my nephew—he is my oldest brother’s, my only brother’s, kid.

Okay! Well, he’s done a phenomenal job, and it’s great to bring family into the business. You know, a lot of these things took us so many years to learn—the lessons, the pitfalls—and obviously, we’re trying to bring these to our kids as well.

Trying to groom my daughter and my kids into potential roles. So, I think it’s great that you’ve been able to do that.

Yeah, it’s been great. You know, it’s tricky sometimes with family, but at the end of the day, I think I’d rather have that dynamic than not. Eric has been unbelievable—he’s a great asset to the team.

Yeah, great. Well, Alix, really appreciate your time today. If people would like to get in touch with you, learn more about Ashland, what you guys are doing—what’s the best place for them to reach out?

Easy, just go to our website: ashlandcapitalfund.com. You can obviously reach me through that, or if you want to email me directly, it’s Alix with an I—I can’t spell my name—so A-L-I-X@ashlandcapitalfund.com.

Awesome. Thanks again for coming on the show today. We’ll put all the links for that in the show notes for everyone, and really appreciate your time, Alix.

Thanks, Dave. Great to see you.

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