Focus on primary MSA’s with diverse employment nodes and strong population growth that fits our market criteria
Source deals from trusted broker relatioships that are mostly off-market opportunities
Underwrite deals using our strictly defined acquisition criteria and stress-test to ensure our down-side risk is mitigated
Drive operational improvements via streamlining processes, reducing overhead, renegotiating contracts and incorporating technology
Harden asset with capital infusion to physically improve interiors, curb appeal, and amenities and cure deferred maintenance
Improve tenant base by implementing stronger qualification standards, addressing lease violations promptly and maintaining strong reputation management
Utilize KPIs to maximize rent premiums, command renewal increases, drive traffic, etc. that should drive top line rental and other income growth
Ensure expense reduction strategies such as water conservation, volume-based sourcing, etc. are being realized via regular tracking analysis
Ensure cash-flow targets are being achieved via proactive variance tracking
Strategize capital events such as refinance or sale to capture forced equity
- Class A / B / C Multifamily Housing
- Years Built: 1980-2020
- 80%+ Occupancy
- Minimum functional obsolescence with deferred maintenance that can be remediated
- Opportunities with proven value-add potential to force appreciation
Target Investor Returns
- 5-7% Annualized Cash-on-Cash (CoC)
- 1.8-2.0x+ Equity Multiple (EM)
- 16-20%+ Average Annual Return (AAR)
- 13-16%+ Internal Rate of Return (IRR)
Focus on strong risk-adjusted returns factoring asset, location, and business plan. (based on a 5-year hold model)
- Texas, Georgia and Florida
- Primary MSA’s > 100K population
- Median HH Income (1-mile) > $40k
- Job / Pop Growth > 2% annually
- Workforce Housing Demand > Supply
- Class B- or better submarkets
- Near diverse job centers, acclaimed schools, retail and transportation nodes
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.
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 improvements that positively impact tenants. By providing certain 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.
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.
In our current housing market, multifamily rental units are playing an increasingly important role by providing necessary housing solutions to those entering the rental market out of necessity, rather than by choice.
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 in 2021 at just over 96%.
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 Equity Partners along with our investors are changing communities one apartment at a time.