Below are two reasons why multifamily and assisted living communities are, in our opinion, the best asset classes for compounding capital with incredibly low overall volatility.
- Economies of Scale
- Forced Appreciation
Economies of Scale
- Multiple Cashflow Streams – Owning 100-250 doors offers investors the ability to scale and use multiple income streams to smooth overall returns.
- Professional Property Management / Operators – At Cloud Capital, we work with best-in-class property management firms and operators on all of our properties. We communicate daily to make sure our business plan is being implemented to the highest standard and hold weekly conference calls to hold them accountable for achieving the KPI’s outlined in our business plan.
Appreciation can occur in two ways and is the most exciting way to compound capital and perform high above our proforma projections.
1. Market Appreciation – This is the appreciation of real estate over time and is the one factor that we as sponsors cannot control. To mitigate our risk, we always underwrite a market scenario that is worse than current economic conditions. This additional layer of safety allows Cloud Capital to weather economic storms.
2. Forced Appreciation – This is how we create major value (profits) at our properties. We create value by significant capital infusion, increase operational efficiency, and implement other value-add strategies throughout the life cycle of the property. Essentially, we increase our properties value within the first 12-15 months of ownership by implementing a strategic and proven business plan.
We “force” appreciation by increasing revenues ie — raising rents, adding amenities, upgrading unit interiors, charging for parking, valet trash, pet fees, ect.
In a 200-unit building with a 5% cap rate, if rents are raised by just $25 per unit per year, the value of our property will increase by a staggering $1.2MM.
by decreasing expenses ie — reducing utility bills, energy-saving appliances, sub-metering utilities back to tenants, tax reassessments, renegotiating vendor contracts, negotiating lower management fees, etc.
Forced Appreciation Is What Makes Investing In Real Estate So Powerful.
We are grateful and appreciate the confidence you have placed in Cloud Capital as sponsors and stewards of your capital. You, our investor-partners, are our most important competitive advantage.