We do extensive market research to find cities that are experiencing population, job, and wage growth. We then do a thorough financial analysis looking for an upward trend in rents, favorable buy/rent ratios, and many other important metrics. Once a solid market is identified, we put together a local team with intimate knowledge of specific neighborhoods, local real estate laws, and established contacts to help us identify undervalued properties that can be purchased at a discount to full-market-value.
To raise the funds needed for a down payment and rehab costs on these larger apartment complexes, we put together a "syndication". In very basic terms, this means we get a group together and pool funds to come up with a much larger sum than one individual would be capable of. This is generally done by creating a Limited Liability Corporation in which members of the syndication own shares based on their contribution. Everything is legal and documented using attorneys familiar with SEC regulations and requirements.
Once a property is under contract, we immediately begin implementation of the business plan that was created during the purchase process. Our strategy is to increase the value of the property by raising the Net Operating Income (NOI). This is typically done through improvements to the property that allow significant rental rate increases. We also improve management and look at other unique ideas to increase income and decrease expenses. The properties are professionally managed by local experts that we work very closely with to ensure successful execution of the business plan. Sometimes the property manager(s) will be invested as a partner in the property which is a great way to align interests and ensure top level performance.
As a limited partner, this is where you sit back and collect your portion of the cash flows generated by rents. We manage the asset and the property manager takes care of the day-to-day duties. We'll keep you updated on the financial performance as well as progress on any rehab efforts or other important information regarding your investment.
Our goal in most cases is to return investors capital in a 5-10 year period. The specifics of each deal will always be detailed in the business plan that is provided to you before committing your investment.
Due to the value we have added to the property through increased NOI and capital improvements, we expect to see significant profits from the sale of the property. Profits from the sale (less selling expenses) are divided up among the investors based on their share of ownership the same way that rents are divided.
In some cases, we may choose to refinance the debt on the property, which allows for a return of the investors capital, while maintaining ownership of the property and continuing to collect cash flows. This creates an "infinite return" on your money since you are still collecting checks on money that has been returned to you!