Multifamily

Our primary asset class is market rate value-add multifamily, typically 75 to 300 units minimum, class B and C properties in suburban and metropolitan areas.
We prefer assets built after 1975 to avoid common construction inefficiencies found in older vintage assets.
We target long term growth markets in order to achieve stability and long term rental and value appreciation.
We can acquire assets or portfolios north of 25M if the opportunity arises.

Undervalued multifamily buildings are identified using the criteria below for acquisition, value optimization, management, and disposition.

MARKET SEGMENTS

Age: The 18-35 year old market segment accounts for 24% of the population in the United States
Income: Renters with an annual income of $40,000 or more
Price: Rent is 30 percent of the median income or less
Retiring Baby Boomers are downsizing and opting for low-maintenance multifamily living

PROPERTY CRITERIA

Multifamily residential apartments
Construction with a pitched roof is preferable.
Occupancy of more than 80%, with the exception of properties in need of renovation, assuming that the properties are well-located and offer value-add potential

TARGET VALUES

75+ units in the $5MM – $75MM range in size and price
Returns: 7 – 10% Cash on Cash, with a Debt Service Coverage Ratio of at least 1.25
Property Type: C to B+ properties in C+ to A areas
Property Vintage: 1975 or newer
Location: Emerging market areas with high near- and long-term economic growth indicators

EMERGING MARKETS

HOW DO WE DEFINE EMERGING MARKETS?

Rather than leaving, people are moving in
Rather than being lost, jobs are being created and relocated
Rents and property values are increasing
Local government is committed to attracting new jobs
Oversupply is starting to be absorbed by markets

We discover emerging markets in the United States by analyzing a variety of variables based on comprehensive study. We begin by conducting extensive market research, which encompasses the following areas:

Job Growth Report
Population Growth
Path of Progress Reports
Local Economic Reports & Trends
Chamber of Commerce Reports
And many more factors

ACQUISITION PRACTICES

Each asset is subjected to a thorough due diligence procedure in order to confirm the property’s physical and legal state, as well as valuations, in order to verify that investment strategies are achievable.

The debt and equity financing plan is designed early in the asset evaluation phase based on a number of parameters such as the kind of property, the scope of renovations, the estimated hold time, and investor goals. Depending on the asset’s particular business plan, it’s normally held for 3-7 years.

INVESTMENT DISCIPLINE

Asset selection entails a systematic, routine assessment of favorable demand features such as job and population growth, demographic transitions, supply absorption rates, and favorable local legislation.

The most favorable underwriting is given to markets with supply restrictions. Surplus property, zoning amendments, and increases in building permits are all symptoms of excess that should be avoided.

VALUE-ADD STRATEGY

Consider it more of a company than a building. The more income it generates, the more it is worth. We search for specific chances to enhance cashflow in several areas when we buy an apartment complex. “Value Plays” or “Value Adding Components” are the terms for this type of strategy.

VALUE PLAYS WE CAPITALIZE ON

Mismanagement caused by owner self-managing
Poor supervision of management companies
Deferred maintenance
High vacancies
Below market rents

At MDB Equity Group, we use the following value-add strategies:

Improve curb appeal by adding landscaping, dog parks, and car-ports, among other things. When a property is in better condition and has amenities, residents are willing to pay more
Buying a property at a discount of 10% or more below current market rents. This provides us the option to raise rents while also increasing the property’s value
Implement a bill-back system for water and sewage to charge residents for real usage. The majority of apartment owners are responsible for all water usage. When we bill the inhabitants, we are able to reduce expenses and enhance revenue flow. Residents will become more frugal as a result of this method, lowering overall operational expenses
Renovate the inside of the units with new paint, appliances, countertops, and flooring