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Accredited Investor
An Accredited Investor is defined by the Securities and Exchange Commission to include a natural person with:
1. A net worth or joint net worth with the persons spouse exceeding $1 million, not including the value of the primary residence, and / or;
2. An annual income of $200,000 in each of the two most recent years, or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income in the current year.estments that transform communities for the better.
Sales Comps
When buying and or investing in an apartment community, you are investing in a rental real estate business. Don't forget that you're buying a business first and a property second. You need to know what similar businesses, or in this case, apartment communities, are trading for in the current market conditions.
Determining multifamily sales comps are different from single family because there is a finite amount of multifamily asset trades year over year.
In single family, it seems there are an infinite amount of sales in North Texas. For example, there are over 100,000 homes sold per year on average, and only 300 multifamily apartment communities sold on average per year. This means that the sales data for comparable multifamily sales is even more paramount when finding the assets value.
How do we establish the value of an asset using sales comparables?
First, you want to use the macro factors most firms use to make an initial determination of value. The macro factors include:
• The capitalization rates at current market value
• The location or submarket that the property and asset is located
• The vintage, or the age, of the asset and how it compares to other sales in the submarket
• The style of the investment - Core, Value-Add or Opportunistic?
• Price per unit based on the vintage
• Price per square foot based on the vintage
Next, you'll get more granular using detailed physical characteristics. These will include the following:
Interior Finish Outs of the Units
Are the interior finish outs dated for the current interior design trends of the time, or are they updated for the current timeframe? If they are dated, do they need updating and to what level of renovation do they need?
Capital Expenditure
How much will you have to spend or invest from a capital expenditure perspective on renovations and asset repositioning?
Amenities
You will also use the property and asset amenities, such as parking. Is there a parking garage? If no garage, is there covered parking? Does the community have a gym? Are there pools, pet parks? Is the community gated, etc.
Location
You will also review the location. How are the schools? What’s the median income? Is the neighborhood safe? Is there crime?
Financial Performance
You’ll use the financial performance of the asset utilizing a rent roll, the financial statements, and their information. You’ll also need to understand if the property is currently stabilized and operating efficiently, or is the property distressed in some form or fashion. Most assets trade on a future value. This means they trade on a small to large premium to market comparables based on the financial performance of the asset.
These above are all additional, more detailed factors that you would use to compare your asset to the previous sales comps in the market.
A few resources to utilize to aid you in sourcing sales comps, among others, can be the following:
Real Estate Investment Sales Firms
The firms that specialize in multifamily investment sales should have very detailed data on all former and previous sales comparables in the market.
Appraisal firms
Appraisal firms that specialize in assisting these real estate investment sales firms and lenders in appraising property value. They are a tremendous resource to help you determine current and previous sales comparables.
The reason the investment sales firms and the appraisers are so important is because there is no regulated commercial real estate MLS like there is in single family real estate.
Some software that many professionals use to determine sales comparables are the following:
Yardi
Yardi is a national robust management software property management software. They aggregate a tremendous amount of information from rental rates to sales comps to macro market trends, including income growth, et cetera.
Costar
Costar is the unregulated MLS is an enormous data aggregation tool. They don't just utilize multifamily. They also do other commercial real estate product types.
Axiometrics
Axiometrics is owned by Real Page. They are a property management software and data provider. They provide rents comps, sales comps, and macro and micro market data trends.
It is best to keep a database of past sales comps that you can easily refer to as the market moves forward and new properties trade. This data will allow you to become very tuned into the slightest changes in the market.
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