High Rate of
Part of our investment philosophy is to identify underperforming assets that have upside potential where we can increase the net income and increase the value of the property. We love B & C class multifamily properties that need some rejuvenation and most of the time they easily beat the 7% average return that the stock market has produced. We bring new management, improve operations and you reap the rewards passively.
As an owner of multifamily apartments, we get many incredible IRS tax advantages. Depreciation and cost segregation, interest deductions, 1031 exchanges, passive income rates, and refinances just to name a few. For estate planning, a legacy transfer can be a powerful strategy to eliminate capital gains and depreciation. An example would be when your depreciation deduction is greater than the rental distributions paid out that year. You collect money in your bank but you wouldn't have to pay taxes on it that year.
One of the biggest benefits of multifamily investing is the ability to "force appreciation" and increase the value the property based on a higher net operating income and the multiplying effect that the CAP rate creates. The increase in NOI is achieved through strategic renovations that give us high unit rents and implementation of operational improvements that decrease our costs.
High Level Property Management
We look for trusted property management partners to work with our residents and assist us in collecting rents at market value. For our buildings that are 100+ units we will have on-site management and strong regional support, while they manage at least 5,000 units nationally. We benefit from their experience, advanced cloud based reporting, deep relationships with vendors, and deep market data.
Economies of scale
Apartments are bigger and we have more units, residents, employees, vendors and materials which is valuable to us because it creates purchasing power and leverage. Everything is multiplied when we do it right, so when we increase rents or decrease expenses it's on many units, when we buy materials it's in bulk.
In addition, once our teams and systems are in place for a specific submarket, acquiring new assets is easy and increases their value.
3.9 million units
Supply and demand are so important when it comes to the value of an investment increasing. There is consistently a shortage of high quality homes for people to live in and our residents still need a place to live. We believe that this shortage in housing will keep the demand for high-quality affordable apartment units high.
Working with large institutional banks is a breath of fresh air, they are the biggest money partner in these investments. They properly vet our team, they underwrite the deal themselves and make sure we have enough liquidity and the balance sheet for a successful investment. They provide some of the lowest interest loans that are typically non-recourse and lend to us as though each apartment is a small business.
Down the Debt
When we establish long term loans on these investments there is the interest and the principal. The interest is the profit the bank gets if they keep the loan and the principal goes towards paying off our loan. Every single month we receive rents from our residents and pay the mortgage payment is another month that we are building up equity by paying down the principal loan balance.