"NEED FOR SPEED" Model Drives Investors to Reinvest

“At our core, we are investment agnostic.  We are first and foremost investors focused on creating wealth with the lowest exposure to risk. We love certainty.”

Janet LePage and Dave Steele of Western Wealth Capital have a disciplined approach that fuels their long road of consistent returns.

There are three heartfelt words that can make any investor melt:  “Compound annual returns”.  For investors facing a volatile market, these three words resonate as deeply “I love you”.  However, no matter whether you are looking for love or compound returns, both are equally elusive.

To realize compound annual returns, you need certainty of market and strategy – a fixed outlook.  In our industry, some real estate investment trusts (REITs) can offer dividend reinvestment plans, allowing investors to reinvest dividends in additional shares of the company.  Typically, these REITs invest primarily in commercial properties, such as downtown office buildings, and pay routine dividends from rental income and capital gains.  These are long-life and predictable assets to generate compound returns.

But they’re not the only avenue.  Western Wealth Capital’s disciplined strategy, pace, and track record have created a new opportunity for reinvesting equity over time:  the acquisition, optimization and divestment of multifamily rental properties.

To date, we have executed on the full cycle of our business strategy 13 times, often over a relatively brief period of 18 to 28 months.  The average annualized return for these divestments has been 34.08%.

Our consistent performance has built certainty, and, similarly, fuelled investor retention and referral.  We estimate that 90% of our investors reinvest some or all of their equity in subsequent WWC opportunities.  Investors roll their money forward, project to project.  Some spread their equity over a number of opportunities.  We have become a dedicated slice of our investors’ overall portfolio pie.  As you see from the tables below, investors are not receiving strong performance but potentially realizing compound returns over several years.

There are three main pillars driving the ability to deliver consistent returns over an efficient timeline.

Disciplined, Precise Strategy

At our core, we are investment agnostic.  We are not real estate investors.  We are first and foremost investors focused on creating wealth with the lowest exposure to risk.  We love certainty.  Our thesis is simple:  People need a roof over their head, and in fast-growing cities, that can be hard to come by.  We look for cities where growth of GDP, population, and employment increase property and rental prices over the long term.  Specifically, we focus on markets where population growth outpaces both existing housing supply and near-term single-family and multifamily additions.  Declining or below-average rate of home ownership and affordable income-to-rent ratios are also winning determinants.

To date, we have focused on Phoenix and San Antonio because they continue to host our investment fundamentals.  We are just as precise as to where we allocate capital in these cities.  We acquire undervalued Classes B and C multifamily rental properties; carefully invest capital to accretive improvement; and optimize operations – including normalizing rents, updating kitchens, and adding washers and dryers – to increase the asset’s net operating income (NOI) and valuation.  We have never deviated from this strategy, only optimized it.

Pace and Scale

Repeatability not only creates scalability but ongoing opportunities to improve our business strategy.  In short: How can we do better?  As addressed in a previous column in this magazine, we call the end result “the need for speed.”  Our refinement has allowed us to accelerate the improvement in NOI efficiently, providing a shorter runway to achieving our investment goals. During the acquisition cycle, we consider the passing of the nonrefundable stage our triggering event.  At this point, we begin implementation of our 24-point checklist of near-term improvements and action items.  On acquisition close, we quickly execute all prearranged improvements.  Very quickly we begin our program of normalizing rents to market rates, marketing unit improvements that include upgraded kitchens and added washer and dryers, and investing in community renovations.

This modest capital investment generates materially accretive returns.  Our track record shows that the resulting increase to NOI, using a conservative capitalization rate, can increase a property’s valuation equal to investors’ original equity.  We leverage supplemental financing because our investors value certainty.  We ensure our loan terms allow for an annual appraisal to leverage improved NOI and property value.  And we increase the existing loan to return equity back to investors.

Track Record

If investors wish to roll their equity forward, they require an ongoing inventory of investment opportunities.  By remaining disciplined to a model that works, we’ve built a strong reputation with commercial property brokers, financial institutions, and property management companies.  They know what we like.  This has given us exposure to large pipeline of some of the best multifamily investment opportunities in the American Southwest.  Along with building out our bench strength prudently. this deal flow has allowed us to execute on a large number of opportunities, year over year.  From 2015 to 2017, we acquired 30 multifamily communities (for a total of 5,908 units) in the southwest United States.  This year, we are on pace to match or exceed the 12 acquisitions made in 2017.

And we are now extending our viewpoint to the rest of the United States to leverage a business strategy that builds better communities and rewards more investors.

For more information, see the article here from REIN Life – May 2018 or contact the IRR team.

 


Own Real Estate Without A Mortgage With A Limited Partnership | Investment Revenue Realty Blog

With the new OSFI mortgage qualification stress test and other government measures put in place recently, many Canadians are looking for creative solutions to allow them to enter into the real estate market or expand their real estate investment portfolio. The Limited Partnership investment structure leverages the power of multiple investors, allowing independent investors to finance large-scale projects, starting at just $25,000.

So, what exactly is a Limited Partnership?

A limited partnership (LP) is a form of partnership that must have at least one General Partner and at least one limited partner. For the purposes of real estate development think of it as a very sophisticated joint-venture. The Limited Partnership structure is a legal structure that allows two or more partners to invest in a business but limits their individual legal liability (or risk) to the total of their respective investments – and no more. For example, if a partner invests $25,000 (which is the minimum US or CAD contribution for our LPs), they are only responsible for that amount.

The General Partner (GP) has management control, share the right to use partnership property, share the profits in predefined proportions, and has joint and several liability for the debts of the partnership. The GP has the actual authority, as agents of the firm, to bind the partnership in contracts with third parties that are in the ordinary course of the partnership’s business.

Like shareholders in a corporation, limited partners have limited liability. This means that the limited partners have no management authority and are not liable for the debts of the partnership. The limited partnership provides the limited partners a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the limited partnership agreement. General Partners thus bear more economic risk than do limited partners, and in cases of financial loss, the General Partner will be the one that is personally liable.

What does an LP look like in action?

We represent two North Vancouver firms (Western Wealth Capital and Western Canadian Properties Group) that leverage LPs to fund land development, and multifamily value add deals in emerging markets across Canada and the United States. These companies have a combined 30 years of experience and have completed a total of $2.5 billion in real estate transactions.

Our real estate investors contribute private equity funding for the projects and the LP’s are registered owners on the property title, but they don’t have to worry about the headache of acquiring financing, managing the property or delivering operating efficiency.

Investors can sit back and relax, while the LP’s General Partner carries out the business plan. Over the years, our partners have perfected a turn-key business plan that has delivered proven results time and time again.

Western Wealth Capital acquires underperforming US multi-family rental properties and increase net operating income and valuation through an approach that has been successfully applied across our portfolio. The GP manages these assets, distributes resulting cash flow to investors annually and, when appropriate, divests.

Western Canadian Properties Group acquires land, rezones to higher density and develops properties for sale to institutions, owner occupiers or investors. Buy by the acre, sell by the foot.

Read our blog on multi-family real estate for more details on the approach.

What are the benefits of investing in an LP?

The LP structure is better suited for a passive real estate investor looking to leverage equity by investing alongside an experienced developer. Typically, the deal size is larger, earning multiples greater and investment horizon shorter.  Many of our real estate deals generate double-digit annualized return within the three-to-five year investment term.

There is also peace of mind knowing you investing with the best in the real estate business. Financial models are available pre- and post- purchase to provide a transparent look at how each step impacts overall profits.  Ongoing progress reports, online portal access and annual statements are readily available and easily accessible.

Want to learn more about current opportunities to invest in a Limited Partnership? Contact us for details!


How To Invest In Multi-Family Real Estate | Investment Revenue Realty Blog

From dinner table chit-chat to media coverage, British Columbia’s exploding real estate market has been on the tip of everyone’s tongue for some time.  But, what about the booming real investment opportunities south of the border?

With a burgeoning tech sector, Phoenix, Arizona, is on the verge of massive growth. The local government has committed to investing millions into office space and amenities for its growing population. People go where the jobs grow, and with every booming job market, comes an increased demand for housing.

In Phoenix, our partners at Western Wealth Capital are the community’s second largest multi-family owner. Investing in multi-family properties (apartment buildings) is often a very lucrative real estate investment strategy as this sector of the real estate market tends to be in highest demand.  

By developing a repeatable, scalable and profitable system that has the potential to deliver double-digit investment returns for our clients. Here’s how it works:

Finding Underperforming Assets In High Growth Markets

We apply a proven business model to our real estate investments. Instead of simply relying on real estate prices going up to generate a profit, WWC strategy focuses on acquiring underperforming properties in markets it knows are booming due to job growth. WWC identifies properties that have under market rents, don’t show well and are located in high traffic areas close to emerging business centres. It increases their value by increasing the income through its value-add program and ultimately, generates a positive return on investment. Multi-family properties provide the scale needed to create exponential growth.

How We Transform Properties

Generally, our investment projects have a three- to five-year window. During this time, WWC does cosmetic “Goldstar” updates to the apartment units, raises rents to market rate, and installs washers and dryers. The WWC team oversees the project and tracks progress every step of the way to ensure it is on time and budget.

All the while, investors needn’t worry about managing tenants, vacancy or repairs on the building. This is all handled by WWC team.

In doing so, WWC increases the profits for our investors. It’s called the multiplier effect. For example, for every unit that is upgraded, residents can pay another $150 per month. For every washer/dryer installed, another $50 month. This would achieve approximately $270,000 in rent revenue per year for a 150-unit building. Based on a 6% cap rate using the income approach to appraisal that equals $4,500,000 increase in value.

No Mortgage Necessary

In partnership with WWC, we raise funds for investment properties through a Limited Partnership structure. Our investors contribute to the LP without having to acquire a mortgage or dealing with the headache of pre-approvals and rigid mortgage stress tests. WWC teams manage the financing and execute a proven process.

Maintaining A Human Connection

We love WWC approach to business. Janet Lepage, CEO of Western Wealth Capital, the mantra is, “We do business on human terms”. WWC focus is to create a nice place to work and live, so nurturing caring relationships with property managers and tenants is a major priority. We support those that care.

You get what you give. Every year WWC gives to its communities, “We Got Your Back”, a back to school program that provides 1,500 backpacks with school supplies for children in our buildings. Rent Free Christmas for one family in each community that needs a helping hand.  This year WWC raised its own bar giving 3 families Christmas in a Box – rent free December PLUS gifts for the family.

After all, a healthy and happy community is great for residents, and, in turn, investors.

Interested in learning more about investing in multi-family properties? Call 604-764-5647 or book a webinar!

 


Colorado Springs, Phoenix, and Tampa, will see strong rent growth in 2017 because increased demand outpaces supply, allowing landlords to raise rents at a quick pace. As these areas have emerged from the Great Recession, they have added jobs and experienced population growth but have not had as much of an increase in multifamily construction as many other areas have had. READ MORE

Opportunities For Real Estate Investment In Phoenix, Arizona

This week’s post is one that features Janet LePage and her work around investments in Phoenix, Arizona. Janet LePage has been actively investing in Phoenix since 2008 and is the founder of Western Wealth Capital Ltd. (WWC) which provides investment properties in high-growth markets.

 

Shark Tank: Pitching for $2.4 million in equity

The Urban Land institute’s Arizona District Council is bringing together real deals and expert money in an event tailored after popular investment reality show “Shark Tank.” Entrepreneurs present real estate development proposals to a panel of “sharks” and an audience of real estate professionals with hope of being awarded investment capital.  No easy task for even the most seasoned of entrepreneurs.

LePage pitched for equity in the amount $2.4 million in a 37-townhome development. She purchased Dolce Villagio via short sale because the property was going to go into foreclosure. Her business plan: to put in management, normalize rents that were below market value at the time, improve curb appeal and to draw in the right tenant base.

LePage says she believes what the “sharks” liked about her proposal was that she knew the microeconomics of the deal, had a tactical business plan and clearly walked them through how they were going to make money. LePage ended up receiving an on the spot deal from a member of the audience.

“From that point forward, I had a lot more publicity in my name and so it added to just the overall credibility of what I have been doing,” LePage says.

Eight months after making a deal, Dolce Villagio has been painted, received new landscaping, rents have increased to market as units turn over and everything is going exactly to plan, LePage says. When LePage purchased the property it was making $550,000 a year, now it makes $720,000 a year.

 

The Return

Investors have since seen a return on their equity of 120 percent and LePage has done three additional deals beyond Dolce Villagio with the partner she received from the tank.

“It is a really fun event that puts like-minded people in a room, and great things happen when you put like minded-people in a room,” LePage says.

 

Raising For Arizona

Janet Trpin (LePage) and the Western Wealth Capital management team are currently raising capital to acquire their 16th multi-family building in the Phoenix market. WWC acquires mis-managed buildings where they can increase the net operating income 25% – 30% over a 3 to 5 year period, using their proven value adding strategies.

The newest building, Solstice at Arcadia is similar to the 15 buildings before, however this particular deal is a bank-owned building, which is extremely rare in today’s market.

Currently owned and managed by the bank, Solstice at Arcadia is the perfect example of a poorly managed building that WWC seeks to acquire.

To view the Executive Summary for Solstice at Arcadia click here.