Investment Strategy

Acquisition Criteria

We use the following criteria to identify undervalued multifamily properties for acquisition, value optimization, management, and disposition.

MARKET SEGMENTS

22% of the US population falls within the 18-35 year old market segment.
We target renters who earn $40,000 or more annually.
We aim to keep rent at 30% or less of the median income to ensure affordability for renters.
Retiring baby boomers are increasingly choosing to downsize and enjoy maintenance-free multifamily living.

PROPERTY CRITERIA

We focus on multifamily residential apartments.
We prefer properties with pitched roof construction.
We target properties with occupancy rates above 80%, except in cases where properties require renovation and offer well-located value-add opportunities.

TARGET VALUES

We target multifamily properties with 50 or more units, priced between $2 million and $10 million.
We aim for cash-on-cash returns of 7-10% and a minimum debt service coverage ratio of 1.25.
Our focus is on C- to B+ properties located in C- to A areas.
We look for properties built in 1970 or later.
We prefer emerging market areas with indicators of strong near and long-term economic growth.

Emerging Markets

At our company, we characterize emerging markets based on the following indicators:

In-migration of people, rather than out-migration, to the area
Creation of new jobs and influx of businesses, rather than job losses or business closures
Increase in both rental rates and property values
Local government that is dedicated to attracting new jobs and investment to the area
Absorption of oversupply in the market, indicating a balance between supply and demand.

We use extensive research to identify emerging markets in the US. Our process involves analyzing numerous indicators and conducting thorough market research that includes:

Job growth reports
Population growth trends
Path of progress reports
Local economic reports and trends
Chamber of Commerce reports
And many other factors that help us gauge the overall health and potential of a market.

We believe that a data-driven approach is critical to identifying emerging markets with strong potential for growth and long-term profitability.

Acquisition Process

At our company, we conduct a comprehensive due diligence process for each asset to verify its physical and legal status and to confirm its valuation. This helps us ensure that we can implement achievable investment strategies.

During the early stages of the asset evaluation, we develop a financing strategy for debt and equity based on various factors, including the property type, expected hold period, magnitude of renovations, and investor objectives. Typically, each asset is held for 5-10 years depending on its specific business plan. This approach allows us to maximize returns and deliver value to our investors.

INVESTMENT GUIDELINES

Our asset selection process involves a systematic and routine evaluation to identify areas with favorable demand characteristics such as job and population growth, demographic shifts, supply absorption rates, and positive local legislation. We give most favorable underwriting to markets with supply constraints. However, we avoid markets with signs of oversupply such as surplus land, changes in zoning, and increases in building permits.

What is "Value-Add"

Value-Add refers to a business-oriented approach to apartment complex investments. The goal is to increase the property's value by boosting its income generation potential. Our team identifies specific "Value Plays" or "Value Adding Components" when purchasing apartment complexes to increase cash flow in various areas.

VALUE PLAYS WE CAPITALIZE ON

Mismanagement caused by owner self-managing
Poor supervision of management companies
Deferred maintenance
High vacancies
Below market rents

Examples of value-add plays we implement include:

Improving curb appeal by enhancing landscaping, adding dog parks, carports, and other amenities to attract residents who are willing to pay more for a well-maintained property.
Purchasing properties that are 10% or more under current market rents, which enables us to raise rents and immediately increase the property's value.
Implementing a water and sewage bill-back system that charges residents for their actual usage. This approach helps to offset expenses and increase cash flow, as well as encourages residents to be more mindful of their water consumption, reducing operating expenses.
Upgrading unit interiors with new paint, appliances, countertops, and floors to make them more attractive to renters.
Adding a coin laundry facility to the complex to provide a convenient amenity for residents and generate additional revenue.
Targeting properties with below-market rents, which presents an opportunity to raise rents to market rates and increase the property's value.