When we are looking for our next deal, we are very selective. We only look in our target markets that we know are landlord-friendly, with population and job growth. We also look for apartment complexes that have deferred maintenance and/or poorly managed properties. We are looking for ways to increase the value of the property. This can be done by raising income, lowering expenses, or a combination. We are also looking at the amenities and local “comps”, or comparable properties. We want to ensure we can add value to the property and force appreciation.
The properties we look at are usually built in the 1970s or newer. Oftentimes, these properties are in need of renovations and the current ownership group does not have the capital or desire to renovate the units. They often will sell the property before putting in capital expenditures. This is exactly the type of property that we look for!
Once we have found a property that meets our criteria, both market criteria and property type, we will then underwrite the property using the rent roll, profit and loss statement, the offering memorandum, and proprietary third party data. Once we have underwritten the property, we will then go on a property tour to check out the apartment complex in person. This can massively change our underwriting and numbers and is a very important step in the buying process. However, out of every property we underwrite, we do not tour every property because the deal will not make sense.
Due to our selective markets, specific apartment criteria, and underwriting process, we are able to whittle down many apartments. For the opportunities that fit the investment criteria, we will then go on a property tour and update our underwriting. Using the third party data helps us determine if we should proceed with an opportunity. At that point, if the investment numbers make sense, we will submit an offer on the apartment complex.