Finding multifamily assets in strong markets that have an opportunity for us to add value. Many times this can be done by optimizing the operation of the asset in areas such as efficiency, charging competitive market rates, billing back part of the utility costs to the residents, completing deferred maintenance, and adding value to the residents of the property in other areas including increased amenities. All of these things add value to the asset, and ultimately to the investors and owners of it through increased net operating income. We focus on delivering returns by providing best-in-class value for each resident, creating win-win scenarios for all involved. By focusing on providing that best-in-class value to the resident, the property can also deliver superior returns to its owners and investors.
After adding value in the areas mentioned above, and increasing the net income accordingly, the property appraises for much more than it did in its previous condition when it was initially purchased. Many times this allows us to complete a liquidity event, such as a cash-out refinance of the asset at its new valuation, or even a sale. We aim to maximize the amount of capital returned to our investors during this event, thereby reducing the amount of capital invested, while still delivering returns on the asset that are paid out of the income stream. This return of capital is in addition to the regularly payments, also known as cash on cash (COC). The returned capital can then be redeployed into another investment, velocitizing the capital and the associated returns.
Our investment partners will typically be able to participate in the depreciation of the asset, which then offsets any tax burden on the income they have received, many times allowing for tax free income from the asset.