Stock Market Data

Our Market

Selection Criteria

Emerging Markets

The following criteria are used to identify undervalued multifamily properties for acquisition, value optimization, management and disposition.

EMERGING MARKETS ARE CHARACTERIZED BY

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There are many indicators and a lot of research that goes into identifying an emerging market in the US. We start out by performing thorough market research that includes the following areas:

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Property owners who have suffered through years of a contracting buyers’ market frequently don’t recognize early signs of recovery. As investors, they are still feeling the pain of the previous cycle, characterized by decreasing rental rates, oversupply, and rising vacancies and unemployment. It can take local investors as much as a year or more to realize that their market has begun to turnaround. That is the prime buying window. MIG monitors indicators of emergence.

Markets Cycles

When national attention is focused on a particular market, smart investors are already selling their properties. A common investing mistake is to jump into ‘hot’ areas reported on by the press.  At any given time – regardless of what the national economy is doing – certain cities are in a local expanding cycle, not a ‘hot’ cycle.

JOBS BRING MARKETS BACK TO LIFE

For a city to move to the next phase of the market cycle, it must take action to grow jobs. When jobs are finally created, people begin to migrate back into a community, population grows, vacant properties start being filled and rents start to increase over supply stalls markets and triggers the decline of emerging markets. MIG tracks job growth and shrinking supply.

 

Path of Progress

A Path of Progress is where the greatest amount of building and development is currently occurring, or soon will be. What is now Orange County was a Path of Progress between Los Angeles and San Diego?

A Path of Progress is where

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Value Plays

One of the critical things to understand when it comes to investing in commercial apartments is the formula that is used to determine the value of each complex. Unlike single family houses, where the value is determined based on the structure of a comparable property, the value of an apartment complex is based on the amount of income it generates on a yearly basis.

Think of it as a business rather than a building. The more income it generates, the more it is worth. When we purchase an apartment complex, we are looking for specific opportunities to increase the cashflow in different areas. These are called “Value Plays” or “Value Adding Components”.

VALUE PLAYS SOLVE PROBLEMS CAUSED BY

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A single Value Play opportunity can help generate target returns. Here are some examples of Value Plays:

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In an emerging market where a lot of new jobs are being generated, the annual market rent increases by 3-4% to support the new demand for housing. One of the next steps will be to show you the impact that each of these value-add components can have on the value on an apartment complex (remember the more income we generate, the more the complex goes up in value).

In the graph above, you will see the purchase price and the Net Operating Income (NOI). NOI is the gross revenue minus all reasonably necessary operating expenses. The value of a property is determined by theNOI and the capitalization rate (Cap Rate) for a particular geographicarea.The Cap Rates are provided by local Realtors who keep a pulse on the local market.

Here is an example property that has anNOI of $156,600. The geographic area has a 9.5% Cap Rate (provided by local Realtors). The formula for determining value is NOI/Cap Rate= Value. Thus, an NOI of $156,600 and a Cap Rate of 9.5 yields a value of $1,648,421. Thus the “strike price” for the proposed purchase is ~1.648 Million dollars

The above graph shows an example ofspecific components/amenities that will be used to add value during a3-5 year hold period. Notice the increase of NOI at the end of 5 years. Increasing the NOI by $71,901 has significantly increased the value of the deal. Here’s the way the new value is calculated:

NOI of $228,501 / 9.5% Cap Rate = $2,405,274 (value). Keep in mind the mortgage will havealso been paid down during the 5 year hold period, thus adding additional equity that can be shared with investors on resale.

Real estate markets and Cap Rates fluctuate. A 9.5% Cap Rate today, may sell for a higher Cap Rate later if market conditions have changed and financing is less readily available. New properties coming to the marketplace can depress rents and increase vacancies, causing a reduction in NOI. Thus, it is important to invest with seasoned sponsors who specialize in multi-family investments to ensure that all such factors are taken into account during acquisition, operations, and timing the optimum resale period for a specific property.