Why Multifamily?
Multifamily investing is a counter-cyclical industry that does well, even in a lousy economy
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Multifamily
Multifamily investing is a counter-cyclical industry that does well, even in a lousy economy. Unlike single-family homes, the demand for apartment units has reached record levels. Buyers, who three years ago could secure a mortgage to buy their own house, are now challenged to qualify for homeownership loans. The demand for upgraded living space is at all-time highs, with housing shortages exceeding 5.5 million units in the US. BDM Capital Group, LLC (BDM) is dedicated to identifying opportunities in solid growth markets to meet the ever-present demand for B and C class multifamily properties.
WHY MULTIFAMILY?
- As an investment vehicle, the apartment market offers investors greater returns with less risk than other investments.
- The apartment market is less reliant on business cycles for occupancy and will continue to benefit from demographic trends and population growth.
- Multifamily ownership is more management intensive than some other asset types. This distinction ensures "value-added" opportunities.
- Apartment demand is driven by an expanding and transitional population and, at present, by record numbers of foreclosures
- Young people move out of their parents’ homes & students graduate from college
- Immigrants come to the US for college or employment
- Workers staffing new factories move into nearby neighborhoods
- Financial challenges create the need for temporary and affordable housing
WHY INVEST IN APARTMENTS?
Multifamily properties historically maintain a structurally lower vacancy rate than other product types and generally exhibit greater resiliency in holding their values during market downturns. Demand can still increase for apartments in economic downturns when homeowners rent to preserve capital and renters cannot afford to buy. Lenders offer superior terms due to investor familiarity with this asset type, and there is wider availability of financing options.
The relatively high turn-over of apartment units (vs. office buildings, commercial space, and single-family homes) allows us to continually improve the assets as tenants move, increasing rents and therefore increasing value.
INVESTING IN MULTIFAMILY PROPERTIES
Many Wealth Management firms are moving a large portion of their investors into multifamily investment opportunities like those offered by BDM. The earning potential in the commercial real estate markets is climbing in states like Florida, Georgia, Texas, Alabama, Ohio, North and South Carolina, Arizona, and Kentucky. Because of record-low interest rates, there is an increased interest in multifamily investment projects. Private equity firms and individuals are seeing high returns in the multifamily sector due to the demand for housing in larger markets and highly populated areas and low-interest rates. The investment opportunities to build, develop, acquire and renovate multifamily complexes produce attractive investment gains.
Acquisition Criteria
The following criteria identify undervalued multifamily properties for acquisition, value optimization, management, and disposition.
Market Segments
- Age: The 18 to 34-year-old market segment comprises 22% of the US population - Income: Renters who earn $35,000 and less annually - The retiring Baby Boomers are scaling down and are enjoying carefree multifamily community living.
Property Criteria
- Multifamily residential apartments - Roofs with pitched construction - Minimum Occupancy 80% except for properties that require renovation, providing the properties are well located and present value enhancement opportunities.
Target Values
- Size and Price: 40 + units in the $1.5 MM – $10 MM range - Returns: 15-20% Cash on Cash, minimum Debt Service Coverage Ratio of 1.5 - Type: C- to B+ properties located in B- to A areas