Highlights
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- Veritas Equity Partners specializes in workforce multifamily housing in Washington State’s tertiary markets.
- The firm offers direct investment in specific apartment deals, with transparent ownership and control.
- Target returns combine cash flow (6-9% cash-on-cash), equity appreciation (1.75-2x equity multiple), and tax benefits.
- Conservative debt strategy using fixed-rate government-backed loans with significant down payments.
- Focus on B and C-class properties to capture operational efficiencies and higher returns versus Class A.
- Leveraging technology mainly for property and asset management to enhance tenant experience and streamline operations.
- Use of 1031 exchanges to defer taxes and enable reinvestment across deals for investor continuity.
Summary
In this episode of The Innovators and Investors Podcast, host Kristian Marquez interviews Alex Burch, partner at Veritas Equity Partners, a real estate investment firm focused on multifamily workforce housing in Washington State’s tertiary markets. Alex shares insights on Veritas’s investment thesis, strategy, and operational approach, emphasizing direct ownership in specific properties rather than blind funds or REITs. The firm targets B and C-class apartment buildings in strategic locations around Seattle, aiming for diversified cash flow, equity appreciation, and tax advantages, including cost segregation and depreciation benefits.
Alex explains their conservative approach to financing, utilizing government-backed agency loans with fixed rates and substantial down payments to minimize risk. They avoid variable or mezzanine debt and conduct thorough pre-purchase underwriting, including debt and insurance assessments. The firm manages properties end-to-end, including tenant relations, property management, and accounting, providing investors with “mailbox money” and transparent monthly reporting.
The discussion covers lease strategies (primarily 12-month leases), a cautious stance on short-term rentals like Airbnb, and the use of 1031 exchanges to defer capital gains for investors who want to stay invested through successive deals. Alex emphasizes the importance of understanding the seller’s profile and the condition of properties to avoid hidden issues and maximize operational efficiencies.
Alex also reflects on his career progression from self-managing small residential properties to co-founding Veritas, highlighting key lessons such as trusting one’s gut, the value of mentors, and the importance of taking action once reasonably confident. He discusses the firm’s use of technology to optimize property management and tenant engagement, including incentives for electronic rent payments.
Looking ahead, Alex advocates for sticking to core markets like the Pacific Northwest, which have strong economic fundamentals, limited land for new construction, and sustained housing demand. He warns about risks in overheated secondary markets where many investors may face refinancing challenges. Finally, Alex expresses interest in featuring guests who have experienced both great success and failure, believing that learning from mistakes is as valuable as learning from wins.
Key Insights
- Direct Asset Ownership vs. Blind Funds: Alex stresses the advantage of direct ownership in known properties over REITs or blind funds, allowing investors to have visibility and control over their investments. This transparency reduces uncertainty and builds investor confidence, a critical factor in real estate investing.
- Balanced Return Model: Veritas balances returns across three pillars—cash flow, equity appreciation, and tax advantages. This diversified return profile appeals to varying investor goals, ensuring deals are structured to deliver multiple forms of value rather than relying solely on appreciation or cash flow.
- Conservative Debt Strategy as Risk Mitigation: By using agency loans with fixed interest rates and avoiding risky variable or mezzanine debt, Veritas minimizes exposure to interest rate volatility. This approach is particularly prudent given current higher interest rates, ensuring deals must perform from day one without relying on favorable future rate changes.
- Due Diligence Focus on Seller Profile and Property Condition: Understanding who is selling and their management practices is crucial. Sophisticated sellers may have maximized rents and minimized expenses, leaving little upside, while less professional owners may have hidden maintenance issues. This insight guides underwriting and risk assessment.
- Preference for B and C-Class Properties: Targeting workforce housing in these classes allows for operational improvements and rent growth without competing in the crowded Class A space dominated by institutional investors with thin margins. This strategy supports higher returns and more control over value creation.
- Importance of Integrated Property Management and Investor Reporting: Veritas’s vertically integrated model, including regional property management and centralized accounting, allows for efficient operations and consistent communication with investors. This turnkey approach helps scale more deals while maintaining quality control.
- 1031 Exchange Complexity in Syndications: While 1031 exchanges offer compelling tax deferral benefits, they require unanimous investor participation to roll proceeds into new deals. Veritas builds flexibility into operating agreements to manage partial opt-outs, reflecting the complexity of managing group investor preferences in syndications.
- Leveraging Technology for Tenant Engagement and Management Efficiency: While real estate acquisition and underwriting remain highly relationship-driven, Veritas uses technology to streamline rent collection, tenant communication, and financial reporting. Incentives for tenants to use auto-pay and online portals reduce operating friction and improve cash flow stability.
- Core Market Focus and Long-Term View: Alex advocates for concentrating investments in stable, high-demand markets like the Seattle metro area, where limited land supply and strong job growth underpin sustained rental demand. This geographic discipline reduces risk compared to chasing short-term trends in overheated secondary markets.
- Career Lessons: Trust Your Gut and Take Action: Alex highlights that while learning fundamentals is essential, real-world experience and trusting intuition are critical. Waiting for perfect certainty delays progress; instead, acting decisively once sufficiently informed is key to success in real estate investing.
- Value of Learning from Failure: Alex’s interest in hosting guests who have experienced both major successes and failures underscores the importance of learning from setbacks. This mindset promotes resilience and continuous improvement, valuable traits for investors and entrepreneurs alike.
This episode provides a comprehensive look at multifamily real estate investing from sourcing and underwriting deals to managing properties and investor relations, anchored by a practical, experience-based approach focused on risk management, operational excellence, and long-term value creation.
Stay up-to-date with Alex Burch and his work with Veritas Equity Partners.
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