The Multifamily Real Estate Exchange

Multifamily Real Estate Investment

Manny J. Herrera

Introduction

 My name is Manuel J. Herrera, a Florida licensed real estate agents associated with Century 21 Beggins Enterprises, and founder of MRE Exchange Group

 I specialize in Multifamily Real Estate portfolios.

 I provide comprehensive support in connection with the acquisitions, sales and Financing of multifamily real estate Investment transactions.

Multifamily Real Estate

A multifamily real estate property is a single or multiple buildings set up to accommodate more than one family, living separately.

Multifamily real estate can range from a duplex, a 4-plex , to an apartment complex hundreds of units .

Duplex

A building with two houses side–by-side , sharing a common wall

4-plex

A building with Four housing units.

Apartment Complex

An apartment complex is a group of buildings that contains multiple rental housing units.

What is multifamily Real Estate Investment

• Multifamily Real Estate Investment is not as risky or volatile as stocks, and bonds

• It offers higher potential returns than most fixed-income assets.

Low Risk / High Returns

The investment is backed by hard assets: the building and the

Solid Collateral

land.

Investors benefit from predictable cash flows ( the rents), and capital gains (property appreciation).

Cash Flow and Capital gain

• During recession, the demand for multi-family real estate grows.

Economic resilience

• During inflation, rents go up and multi-family property prices rise.

• During recovery, they stabilize

Multifamily Real estate is leverage efficient, because It lets you use 75 to 80 % financing to purchase a property while your returns are based on Cash on Cash invested.

As a consequence of being leverage efficient, Multifamily

Real Estate investment is readily

Scalability

Scalable

Our Business Model

Our Business Model

We acquire, renovate, hold to rent , stabilize, and re-sell multifamily real estate properties on behalf of our clients. In order to enhance investors returns on investment. We leverage acquisitions through 75 to 80 LTC bank Financing, 30-year term, 5-year maturity.

20 to 25% of the purchase price is represented by the investors’ equity contribution to the acquisition price.

How it works

Our focus is on multifamily real estate that it is acquired and then rented out to Tenants . Tenants, pay rents to live in the properties. Some of the income from the rent is used to pay for operating expenses , such as:

• Property taxes,

• Utilities,

• External illumination,

• Trash collection,

• Maintenance,

• Management expenses, etc.

After subtracting the Expenses from the total income, we arrive at The NET OPERTAING INCOME.

Multifamily Properties Investments , as any investment instrument, are valued based on their Rates of Return. (CAP RATE)

The example shows a 4-plex with a total gross rent in the amount of $47,532.00 . Other incomes and concessions , minus total expenses , bring to the owner an annual net operating income of $36,304.40. Notice the property valuations a different Capitalization Rate.

Our Acquisition Strategies

Acquisition Strategies

Core

1. Acquire stabilized Asset type A, and B+.

2. Keep them as they are,

3. Hold them for some time.

4. Sell them in the future,

Core Plus

1. Acquire Asset type B, B+.

2. Make minor Improvements,

3. Update rents.

4. Improve management, marketing ,

5. sell them, in the future, .

Value-Added

1. Acquire Asset Type B-,

C. 2. Complete a major renovation that takes months or years to complete,

3. Hold them for some time.

4. Refinance loan

5. Sell them in the future.

1. “Core” is considered the safest strategy and the one that’s closest to fixed income (bonds) in terms of risk and potential returns.

2. It tends to use less leverage than other strategies, very little about the property changes, and cash flows are stable and predictable.

3. Properties tend to be in major urban centers with plenty of demand.

1. Acquire stabilized Asset type A, and B+.

2. Keep them as they are,

3. Hold them for some time.

4. Sell them in the future,

4. Suitable for passive, conservative investors, interested in steady, predictable, higher-than-average market returns .

5. Low Capitalization Rates , long holding periods ( 5 to 10 years)

1. “Core Plus ” is considered the next safest strategy and the one that’s higher than fixed income (bonds) in terms of risk and potential returns.

2. It tends to use more leverage than core strategy, some visible changes about the property are made, and cash flows are higher than normal.

3. Suitable for less conservative investors in look of higher-thanaverage market returns and some capital appreciation.

4. Holding period tend to be up to 5 period or less.

Core Plus

1. Acquire Asset type B, B+.

2.Make cosmetic Impro vements.

3. Update rents.

4. Improve management, marketing ,

5. sell them, in the future .

1. “ Value-Added” is considered the most lucrative strategies. Double-digit returns , with significant portion the returns coming from capital appreciation .

Value-Added

2. It tends to use more leverage than core , and core-plus strategies, and loan refinancing is expected

3. Significant changes about the property are made, and cash flows fluctuate due to high vacancy during renovation.

4. Suitable for more aggressive investors looking for higher cash-on-cash yields, and participation in capital appreciation.

5. Holding period could be short for higher property appreciation ( 5 to 7 years )

1. Acquire Asset Type B-, C. 2. Complete a major renovation that takes months or years to complete,

3. Hold them for some time.

4. Refinance loan

5. Sell them in the future.

Our Process

The Market

Identifying Emerging Markets

Emerging Markets are new growing or correcting markets with the following profile:

 Growing job opportunities and employment rates that surpass the national average.

 A growing population that is forecast to continue growing.

 Future real estate development plans.

 Affordability (based on price to rent ratio)

 Increasing absorption rate.

We actively pursue multifamily real estate properties in emerging markets at any given time.

Florida vs National Market

Employment overperformed the national market across all sub-markets in Florida. Equally impressive results were observed in property price growth and net operating income, Higher mortgage rates were the primary driver affecting the multifamily Real Estate Market these past years. Annual interest rates increased from 3.3% at the beginning of 2020 to 6.31 percent, by the second quarter of 2022. The highest increase on record going back to 2000.

Tampa Market

The Tampa Apartment Investment Market Index (AIMI or Index) as of the second quarter 2022 was 116, registering a decreased over the quarter of -10.6% and over the year -16.1%. “ The annual decline indicates low that it may be more difficult to find attractive investment opportunities compared with the prior year.

 Property prices grew by 27.2 %

 NOI grew by 25.45%.

 Investors are paying more per dollar of property income compared with one year ago.

 Employment grew a healthy 4,9% per year.

Tampa Multifamily Inventory

Our Vision

• We want to become the platform where investors and property owners meet to acquire and sell multifamily real estate properties, in an organized, efficient and secure manner. We want to be the most reputable and secure source for multifamily transactions.

• We provide comprehensive support in the acquisition, sale, financing and management of multifamily real estate properties in the USA. We develop effective collaborations with: Contractors, Developers, Architects, Mortgage Bankers, Real Estate Brokers, Title Companies, etc.

• We believe that multifamily housing is critical to our society. It is the most efficient way to increase the supply of housing necessary to accommodate employment, community stability , and enhance the quality of life.