HOW IT WORKS
First, it's important to note how multifamily buildings are valued. The value is not determined like your standard home is, by the comparable home sales in the area. The value of a multifamily asset is valued like a traditional business is. In a nutshell, the more the building makes in profit, the more the building can be valued at.
This creates a golden opportunity to purchase these buildings at a discount from owners who don’t understand how to maximize the profitability of their building and maximize the returns for our investors.
The name of the game in multifamily is jobs. Where jobs are going, people will follow. When people move to a new city, they need a place to live. The increase in population drives rents up, increasing the value of the building and the returns for investors.
We target buildings in good, low crime neighborhoods, with proximity to jobs, schools, and entertainment. The ideal opportunity is owned by long time “mom and pop” owners. These typically have had poor management and operations and make a great opportunity for a skilled investor with a good management team and solid plan to increase profitability.
Thorough analysis is done to ensure the asset is a sound investment and provides enough upside or “value add” to meet our expected returns. Once under contract, we negotiate terms of the sale and secure the most competitive financing to match the plan for the property and maximize returns.
Once an offer is accepted, thorough due diligence is completed on the physical property, the financial records and current leases in place.
Once closed, we will begin implementing the business plan created to maximize the profitability of the property. This often includes new management, raising rents, creating or increasing ancillary revenue streams, cutting expenses, and light renovations.
It is important to begin with the end in mind. Once the business plan has been implemented and the value of the property has been maximized, the option to sell, refinance, or continue to collect the cash flow can be made. The current market conditions, property performance, and many other factors will go into this decision.