$1,000,000 In an Hour

June 20, 2024

The Capital Stack

We recently acquired 11 Mile Flats, the smallest property in our portfolio with just 8 units. You can read more about this acquisition here. The part of the deal that I want to highlight in this week’s newsletter is the capital raise, which filled in approximately 6 minutes and reached over $1 million in commitments in under an hour. This follows our previous successful raises: Milford Village Flats filled in 32 minutes, and Sugar Pine filled in less than 24 hours.

Our Capital-Raising Approach

Extended Outreach

Over the past 3 years, we have made a concentrated effort, primarily through this newsletter, to reach more people and talk about what we’re doing. In a perfect world, you wouldn’t know us, and nobody would know anything about our deals. We’d be able to operate in complete silence, buying the best deals, delivering great returns, and continuing to build the business. The reality is that reaching more people brings more opportunities, both in deal and equity sourcing, which are very important aspects of our business.

Consistent Communication

We provide our current investors with monthly updates, sharing detailed information on each of their investments to keep them informed about how their money is being used. This is incredibly important to us. When someone invests with us, we want to make sure we are answering their questions before they can even think of them. We greatly appreciate our LPs, so it’s essential to keep them consistently informed about the status of their investments.

Strong Returns

As mentioned in our last article and several times before, we exited 3 properties in 2023 at great returns. The IRRs for these deals were 33%, 22%, and 12%, with an average hold period of 22 months. These properties were bought in 2021/2022 and sold in 2023, during which the market dropped by 10-20% overall. Despite this decline, all three properties set records in their respective submarkets on a price-per-unit basis. These results provided strong profits to our investors, even during a market downturn, further validating our strategy.

Many who bought before 2020 are said to have “gotten lucky” or benefited from “strong tailwinds,” and this is generally true on the surface level. While timing certainly plays a significant role, we believe that achieving these results during the largest market decline since the GFC shows strong proof of our ability to purchase, operate, and execute a business plan effectively.

What’s Next

We’re presently assessing several opportunities with business plans similar to what we’ve successfully executed many times. We’re highly optimistic about this year’s deal flow outlook. If you’re interested in partnering with us as an LP in the future, simply register in our investor portal. By doing so, you’ll be among the first to receive notifications about new deals.

Major Market News


“Steady-Eddy Midwest”

The article by Forbes discusses the current state of the real estate market, highlighting recent challenges such as WeWork’s bankruptcy, high interest rates, and increased office building vacancies post-Covid. Despite these issues, the author emphasizes that not all markets are struggling equally, pointing out the resilience of certain geographic and asset-specific areas.

The Sunbelt markets, which experienced significant growth over the last decade are now facing challenges. The high competition and low interest rates led to inflated property prices and low cap rates, making current returns less favorable. With the rapid rise in interest rates and an oversupply of new construction, these markets are seeing flat or declining rent growth.

In contrast, the Midwest is now emerging as a strong performer. While it did not see the same explosive growth as the Sunbelt, its steady and consistent growth has proven advantageous. Midwestern markets, including Chicago, are currently leading the nation in rent growth, largely because they avoided the unsustainable price surges seen in other regions. With fewer new construction projects compared to the Sunbelt, the Midwest remains supply-constrained, which supports continued rent growth. The Midwest’s stability and resilience amidst broader market distress highlight its potential as a promising area for real estate investment.

Source: Forbes. (2024, Feb 6th) Navigating Market Shifts From The Sunbelt To The Midwest. https://www.forbes.com/sites/forbesbusinesscouncil/2024/02/06/navigating-market-shifts-from-the-sunbelt-to-the-midwest/?sh=7116200864af

Tips and Tricks

Terms-

IRR: The Internal Rate of Return (IRR) is a financial metric used to evaluate the profitability of an investment over time. It represents the annualized rate of growth that an investment generates based on its initial cost and subsequent cash flows.

In simpler terms, IRR calculates the percentage rate of return earned on each dollar invested over a specific period. It considers the timing and magnitude of cash flows, including both income generated by the investment and any expenses or outflows incurred.

A higher IRR typically indicates a more profitable investment, as it signifies that the investment’s cash flows are producing a higher return relative to the initial investment. Investors often use IRR to compare different investment opportunities and assess their potential for generating returns.

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