• Develop Criteria
• Identify Markets
• Build Teams
Our target markets are ones that are poised with favorable long-term growth that exhibit the following characteristics
- Strong Job Growth
- Strong Population Growth
- Pro-Business Policies
- Affordable Cost of Living
- Diverse employer base
We focus on identifying B and C class multifamily assets that fit the following criteria
- Property Size:100 units and greater
- Property Value: $5-$40M
- Median HH Income (1-mile): $40K or greater
- Target Occupancy:85% or greater
- Cash-on-Cash Returns: 8%+ CoC Returns
- Total Returns: 1.7-2.0x Equity Multiple
- Internal Rate of Return (5 YR): 13%+
Reasons To Invest
Utilizing passive investments in commercial multifamily real estate is a viable proven way to invest in real estate without having to become a landlord. You can leverage professional expertise to create stable streams of tax-advantaged passive income that can buy back your time from work so that you can do the things in life that matter most to you; and that is what makes passive income truly priceless. A stabilized multifamily asset can provide a steady high single digit annual cash flow during the hold period which gets distributed to investors on a quarterly basis. That is mailbox money to investors.
Unlike residential home prices, commercial properties are valued by their income. We can add more value by increasing the income of the property. We find properties where we can make interior and exterior upgrades, such as installing vinyl plank, fresh paint, adding security cameras, updating laundry rooms, playgrounds and other amenities. All these improvements positively impact tenants. By providing these added amenities we attract and retain better tenants, and can charge rent premium or operate more efficiently, thus increasing the value when we sell or refinance. In addition to generating passive income during the hold period, this additional value generated can net an additional 20%-40% of returns upon exit of the property.
Multifamily offers several tax advantages that are not available for traditional investments like stocks or bonds. First, we get a deduction on the property depreciation which allows us to reduce the tax impact on real income. With the new tax law, we can also benefit from cost segregation and bonus depreciation opportunities which allow us to accelerate certain depreciable components of the asset which can further reduce the tax impact. In addition, when we sell the property, we can take advantage of the 1031 exchange option which allows us to indefinitely defer paying capital gains by rolling into another like kind asset. There are also refinancing opportunities available which provide yet another way to increase the returns while reducing the tax impact.
There is also a fast-growing segment of the population choosing multi-family living for reasons other than affordability. The aging baby boomer population continues to downsize from single-family homes as their children leave the nest. This increases demand for both owner-occupied and rental properties in familiar neighborhoods that offer service clusters and convenient transportation.
Meanwhile, as the millennials reach the traditional age for renting or purchasing, more and more are choosing affordable multi-family rental properties as they begin to form independent households. This is due to improved design, easily available amenities like gyms, pools, playgrounds and common rooms, and a focus on resident satisfaction.
We believe the baseline level of demand will continue to be steady regardless of the state of the economy as people are going to need a place to live. According to Yardi, the national occupancy rate for stabilized multifamily assets closed out 2017 at just over 95%.
A number of financing options exist for multifamily projects, including loans from government-sponsored enterprises like Freddie Mac and Fannie Mae. These programs enhance the availability and reduce the cost of credit for qualifying multifamily projects. On a typical project we can get anywhere from 75% – 80% loan to cost with 1-4 years of interest only option thus allowing us to maximize our investor returns on these projects. A lot of these financing options are also non-recourse which lowers the risk to investors.
We not only protect, build and increase our investors capital but we do that while improving the communities that our tenants live in. We invest capital in updating our assets both from an exterior and interior to provide a clean and safe living environment. We can proudly say that Catalyst along with our investors is changing communities one apartment at a time.