Our Strategy
Safeguarding the capital of our investment partners is at the core of Groundswell Assets’ mission. Our sole focus is on multifamily properties and our strategy is to simplify navigating the improvement of A and B Class apartment communities in primary, secondary, and tertiary markets nationwide. Historically, multifamily has been the least volatile real estate asset class during downturns while still offering strong upside potential during up-cycles. Within multifamily, choosing within the A and B classes provides for attractive investment opportunities due to the imbalance between the growing demand and the limited new supply of these units.
Our Acquisition Criteria
The following criteria is used to identify undervalued multifamily properties for acquisition, value optimizations, management and disposition.
MARKET SEGMENTS
Age: The 18-35 year old market segment is 22% of the U.S. population
Income: Renters who earn $80,000 or more annually
Price: Where rent is 30% or less of the median income
Retiring Baby Boomers are scaling down and enjoying maintenance-free multifamily living
PROPERTY CRITERIA
Multifamily residential apartments
Pitched roof construction preferred
Occupancy above 80% with the exception of properties that require renovation, providing properties are well located and present value-add opportunities
Built in 1990 or newer
TARGET VALUES
Size and Price: 100+ units in the $9MM – $50MM range
Returns: 20% Average Annual Return
Minimum Debt Service Coverage ratio of 1.25
Type: B- to A+ properties located in B to A areas
Location: Emerging market areas with indicators for imminent and long-term economic growth
Emerging Markets
Choosing the “right” multi-family apartment complex to acquire is a critical aspect of Groundswell Assets’ investment strategy. We are diligent in our exploration and focus on opportunities in emerging markets, where jobs and local economies are expanding.
EMERGING MARKETS ARE CHARACTERIZED BY
People moving in, rather than leaving the area
Jobs being created and moving in rather than lost
Rising rents and property values
Local government dedicated to attracting jobs
Markets starting to absorb oversupply
There are many indicators and a lot of research that goes into identifying an emerging market in the U.S. When deciding, the following factors are studied:
Job Growth (including potential)
Population Growth
Path of Progress Reports
Local Economic Reports & Trends
Chamber of Commerce Reports
Acquisition Practices
Groundswell Assets takes pride in building relationships with local listing brokers to get their “pocket listings” and access to other Bank Owned Properties (REO). Our searches include soliciting owners directly instead of waiting for properties to come to market.
Each asset undergoes a thorough due diligence process to confirm the physical and legal status of the property and to confirm valuations to ensure achievable investment strategies.
Early in the asset evaluation phase, the debt and equity financing strategy is developed based on a number of factors such as property type, magnitude of renovations, expected hold period and investor objectives. Each asset is typically held 5-10 years depending on its exact business plan.
INVESTMENT DISCIPLINE
Asset selection involves a systematic, routine evaluation to identify favorable demand characteristics, i.e., job and population growth, demographic shifts, supply absorption rates and positive local legislation.
Markets with supply constraints receive most favorable underwriting. Markets with signs of oversupply such as surplus land, changes in zoning and increases in building permits are avoided.
Value-Add Strategy
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 Add” Properties.
Key Indicators for a Value Add Property :
Mismanagement by owner
Poor supervision of property management companies
Deferred maintenance
High vacancy rates
Below market rents
Examples of Groundswell Assets, LLC value-add plays:
Improve curb appeal by revamping the landscaping, adding dog parks, carports, BBQ zones etc. — Residents will pay more when a property is in better condition and has amenities.
Purchasing a property that is 10% (or more) under current market rents. This gives us the opportunity to increase rents, which immediately increases the value of the property.
Implement a water and sewage bill-back system to charge the residents for actual usage. Most apartment owners pay the full water bills. When we bill back the residents, it helps offset expenses and increases the cash flow. Through this system, residents tend to become more frugal and will decrease overall operating expenses.
Improve unit interiors with fresh paint, new appliances, countertops, and floors
Adding a digital pay laundry facility to the complex
Offering residents below market rents
Path of Progress Strategy
In the Path of Progress is where the greatest amount of building and development are currently happening, or soon to be.
A PATH OF PROGRESS IS WHERE:
Properties rapidly shoot up in appreciation
Majority of new construction is going on
Families and individuals are moving into the area
Investing in the Path of Progress yields the greatest returns in a short period of time.
Active Acquisitions
Groundswell Assets is aggressively seeking to acquire value-add apartment communities in Texas & nearby states.
Target Markets: Anywhere in Texas and specific metros across The Sunbelt Region.
Size: 100+ units but will consider less in certain markets
Class: B to A in B- to A+ areas
Potential to enhance value through the following business strategies:
Asset re-positioning through a capital investment program
Correction of deferred maintenance
Improved professional management and revenue/cost control (this is a big deal and we can really work our magic on the NOI here.)
No project is too big!
Purchase Price Budget: Preferably in the $5M-$50M range.
Send us your potential acquisition opportunities to:
info@groundswellassets.com
or fill out our SELLER INQUIRY FORM
multifamily real estate investments
Enjoy passive real estate income without the hassle of management.