Criteria for Property Acquisition
We use the following standards to identify undervalued multifamily properties for acquisition, value enhancement, management, and eventual sale.
MARKET SEGMENTS
Demographics: The 18-35 age group represents 22% of the U.S. population.
Income: Renters with annual earnings of $40,000 or more.
Affordability: Where rent accounts for 30% or less of median income.
Retiring Baby Boomers are downsizing and favoring maintenance-free multifamily living.
PROPERTY REQUIREMENTS
Multifamily residential complexes.
Preference for pitched roof construction.
Occupancy exceeding 85%.
TARGETED PARAMETERS
Size and Cost: Properties with 50-150 units
Returns: Targeting 7-10% Cash on Cash returns, with a minimum Debt Service Coverage ratio of 1.25.
Property Grade: C- to B+ properties situated in C to A areas.
Property Vintage: Constructed in 1970 or later.
Location: Emerging market regions exhibiting indicators of robust near and long-term economic growth.
How we identify emerging markets:
Influx of residents rather than outflow: goal of >1% population growth per year
Job creation and migration into the area
Rising rents and property values
Local government initiatives to attract employment
Absorption of surplus supply in markets
Through comprehensive research, we analyze numerous indicators to pinpoint emerging markets in the United States. Our process begins with thorough market research drawing from the following types of data:
Job Growth Analysis
Population Trends
Path of Progress Evaluations
Local Economic Trends and Reports
Chamber of Commerce Data
Identifying Emerging Markets
Each asset undergoes meticulous due diligence to confirm its physical and legal status and validate valuations to ensure feasible investment strategies.
During the initial evaluation phase, we develop a financing strategy based on factors such as property type, renovation scope, projected holding period, and investor goals. Typically, assets are held for 3-7 years, depending on the specific business plan.
INVESTMENT PRINCIPLES
Asset selection entails a systematic assessment to identify favorable demand indicators, including job and population growth, demographic shifts, supply absorption rates, and positive local policies.
Markets with supply limitations receive preferential underwriting. Conversely, markets exhibiting signs of oversupply, such as excess land or increased building permits, are avoided.
Value-Add Mindset
Viewing properties as businesses rather than mere structures, we seek opportunities to increase cash flow through targeted interventions, referred to as "Value Plays" or "Value-Add Components."
Examples of value-add strategies
Rectifying mismanagement resulting from owner self-management
Improving oversight of management companies
Addressing deferred maintenance issues
Reducing high vacancy rates
Adjusting below-market rents
Examples of value-add tactics:
Enhancing curb appeal through landscaping enhancements, adding amenities like dog parks and carports
Acquiring properties with rents at least 10% below market rates, enabling immediate value appreciation through rent increases
Implementing water and sewage bill-back systems to pass utility costs to residents, thereby offsetting expenses and augmenting cash flow while encouraging residents to conserve resources
Upgrading unit interiors with new fixtures, appliances, countertops, and flooring
Installing a coin-operated laundry facility on the premises
