Imagine getting out of your car in front of a well-marked, nicely landscaped leasing office, and then standing in the parking lot admiring the rows and rows of apartment buildings you now own. Does that seem like an impossible dream? Or maybe an Investment opportunity reserved only for the wealthy or large institutions? Actually, as intimidating as it might sound or appear, ownership in such a real estate project might be a reality that is truly within your ability and means. But let’s first explore why you would want to invest in a large apartment community.
Multi-family ownership has many benefits over single-family rental properties, which are typically the realm of “smaller” real estate investors. For starters, apartments offer economies of scale. That means, your tenants are consolidated under 1 roof (or limited roofs), all sharing the same building structures and various systems, including plumbing, electrical and HVAC. Expenses for maintaining these structures and systems help to dramatically reduce expenses. Other expenses of the apartment community are also shared amongst your tenants; including insurance, taxes, management fees, landscaping and marketing for new tenants. The economies of scale described above are what generally produce superior cash flow over single-family rentals. Another benefit of owning large multi-family assets is the control that owners have over the value (equity) in their property. An apartment’s value is based on its net operating income and cap rate, and owners have tremendous control over the income their properties are capable of generating. This means that with competent and strategic management, an owner has the ability to force appreciation in a big way. Last, because of this ability to quickly add value to an apartment asset, there is the possibility of significant wealth creation over a relatively short period of time.
As “echo-boomers” move away from their parent’s homes and housing in general becomes less affordable, the demographics and trends for apartment growth look particularly strong. Just like any other real estate investment opportunity, the key to success is buying in the right location, at the right time and the right price. Additionally, having a great management team in place is absolutely critical. Done correctly and with an experienced and competent team, apartments can supercharge just about anybody’s investment portfolio.
Bridge Equity Group focuses on finding below market priced apartments in emerging markets, where our management team can begin adding value and equity from day one. Value is typically created when we improve the existing management of the property and correct deferred maintenance issues. Following this strategy, we are able to raise rents, occupancy and other income sources, while reducing expenses. This combination improves cash flow and forces appreciation for our investors.
If these benefits sound interesting, we would love to meet you and have a general conversation about your real estate investment goals. We’ll also share with you the qualifications necessary to participate in our syndication model of apartment investing. Please contact us today for a meeting and discussion.
Frequently Asked Questions
Multi-family properties provide economies of scale unavailable to owners of single-family homes. Properties with multiple tenants living under one roof and sharing expenses almost always have the potential to generate superior cash flow over other buy/hold investment opportunities. In addition, apartment owners can implement many strategies to dramatically increase the property’s income. The possibilities of lower expenses and higher income are the characteristics that make apartments great for cash flow and forced appreciation.
Our projects raise money thru a “syndication” model, which is the pooling of investor money to purchase an asset. Syndications are regulated by the SEC, and require investors to qualify as either “accredited” or “sophisticated”. An accredited investor has a minimum net worth (not including primary residence) of $1 million and/or $200K annual income (single) or $300K (married) over the past 2 years. A sophisticated investor has business knowledge and/or real estate investment experience and expertise. The general concept is that an investor should have the competence to accurately analyze the investment opportunity and its risks.
Equity investors are passive, which means your participation will be mostly limited to collecting distribution checks. As the management team, we will be fully transparent with all operations, both strategic and financial. The financial performance of your investment will be shared on a quarterly basis, and investors can request more detailed financial information at anytime. It is important to do your own due diligence on the management team, since you will be relying significantly on their competence to execute the proposed business plan, from beginning to end.
Although multi-family properties are among the safest commercial real estate investments you can make, there is always a risk in any investment. To mitigate risk, our strategy is to buy apartments “below market” and hire the very best property management team available to increase income and reduce expenses. Since strategies are pretty straightforward, success is often determined by the competence of the team executing the plan. Our team manages the property manager, making sure execution is being performed as we intended.
The exit strategy for these investments is generally five years, although it may vary depending on the property and specific business plan being executed. Changing economic circumstances can also affect the original hold time, so passive investors do need to place a certain level of trust in the management team to make decisions that will maximize all investor’s returns. Original timelines will be adhered to as much as is possible to protect everybody’s investment.
We are constantly looking for great deals. Because we are very conservative with our underwriting, there can be significant gaps between deals. Our goal is two major deals per year.
Every investment opportunity is different, so it is impossible to quote specific terms. Our goal is to only pursue deals that have the potential for exceptional cash flow AND forced appreciation. When we discuss a specific investment opportunity with you, we’ll provide projections for returns and equity growth for the length of the project.