Single-Family Rentals
Focus: Single-family homes that are under market value either due to property neglect or the owner's financial situation (foreclosure, short sale, etc.).
Opportunity: Value-add opportunity through renovations, adding additional bedrooms or additional square footage, or simply increasing the curb appeal.
Business Plan: Purchase below market value, renovate the property to add value, rent it out at a positive cash flow, then refinance to draw out invested capital.
Deal Structure: These deals work best as part of a debt partner structure, where the debt partner offers up a short term loan at a fixed interest rate, and is returned their capital + interest within 6-12 months.
Multi-Family Properties
Focus: Small multi-family properties (2-15 units) that are below market value either due to property neglect, below-market rents, poor property management, or a combination of the above.
Opportunity: Renovations to increase property value as well as rent capacity, increasing rents to market value, more efficient property management, and/or charging utilities back to tenants.
Business Plan: Renovate individual units as needed, increase rents to market value, cut expenses where possible to increase overall net operating income (NOI) and then refinance. For 2-4 unit properties, the market value is based on similar sold properties in the area. For 5+ unit properties, the value of the property is determined by the overall net operating income (NOI), so increasing this also increases the value of the building.
Deal Structure: These deals work great with both debt and equity partners. Debt partners can offer short-term loans at a fixed interest rate for renovations and can expect a quick return of capital + interest. Equity partners would expect to keep their capital invested longer (4-5 years) but would reap the rewards of any equity added to the property as well as monthly cash flows the property generates through rents.
Assisted Living Facilities
Focus: Residential single-family homes outfitted and operating as assisted-living facilities.
Opportunity: Purchasing the real estate and leasing it back to the existing business operator or finding a new operator to run the business. Business typically charge $3k-$6k/month per bed and can be licensed for up to 10 beds depending on the state. Since these properties are outfitted specifically to operate as an ALF, we can typically charge around 2x the market rent.
Business Plan: Leases are typically long-term and operate much like a NNN lease, where the property owner is responsible for the mortgage, taxes, insurance and capital expenditures and the business owner is responsible for routine maintenance and repairs as well as all utilities.
Deal Structure: These deals work best for equity partners as there is typically no immediate value-add to draw capital back. However, they usually provide above-average cash flows, low turnover rates, and much lower-impact tenants. These deals are great for equity partners looking for strong, reliable cash flow every month.