INVESTMENT STRATEGY
NewLife Capital Group focuses on high performing Class B & C multifamily properties in emerging markets across United States. NewLife Capital Group’s core mission is to protect and grow our investors capital with our sole focus on acquisition and management of multifamily properties. Historically, multifamily has been the least volatile real estate asset class during downturns while still offering strong upside potential during upcycles.
Acquisition Criteria
NewLife Capital Group uses the following criteria is used to identify undervalued multifamily properties for acquisition, value add, management, and disposition.
MARKET SEGMENTS
- Age: The 18-35 year old market segment is 22% of the U.S. population
- Income: Renters who earn $40,000 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% except for properties that require renovation, providing properties are well located and present value-add opportunities
- Minimum functional obsolescence with deferred maintenance that can be remediated
TARGET VALUES
- Size and Price: 40+ units in the $4MM – $50MM range
- Returns: 6-10% Cash on Cash
- Minimum Debt Service Coverage ratio of 1.25
- 1.8-2.0x+ Equity Multiple
- 15-20%+ Average Annual Return
- 13-16%+ Internal Rate of Return
- Type: C- to B+ properties located in C- to A areas
- Property Vintage: 1970 or newer
- Location: Emerging market areas with indicators for strong near and long-term economic growth
Emerging Markets
Identifying the “right deal” to pursue is a critical aspect of NewLife Capital Group, LLC’s investment strategy. We diligently focus on opportunities in emerging markets which have the following criteria’s.
- Population Growth: People moving in, rather than leaving the area
- Job Growth: Jobs being created and moving in rather than lost
- Positive Real Estate Metrics: Rising rents and property values
- Government Policies: Local government dedicated to attracting jobs
- Real Estate Supply and Demand: Markets starting to absorb oversupply
Acquisition Practices
NewLife Capital Group, LLC takes pride in building relationships with local listing brokers to get their off market listings and access to new investment opportunities in target markets. Our searches also 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 3-7 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 strategic “Value Plays” or “Value Adding Components”.
VALUE PLAYS WE CAPITALIZE ON
- Mismanagement cause by owner self-managing
- Poor supervision of management companies
- Deferred maintenance
- High vacancies
Some examples of value-add plays we implement at NewLife Capital Group, LLC:
- Improve curb appeal by improving landscaping, adding dog parks, carports, 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 and immediately increase the value of the property.
- Implement a water and sewage bill-back system to charge the residents for actual usage. Most apartment owners pay for all the water. When we bill back the residents it helps offset expenses and increase the cash flow. Through this system residents tend to become more frugal and will decrease overall operating expenses.
- Improve unit interiors with new paint, appliances, countertops, and floors
- Adding a coin laundry facility to the complex
- Below market rents
Path of Progress Strategy
A Path of Progress is where the greatest amount of building and development is 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.
