Multi-Family Value Add
Value-Add + Rental Hold
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Multi-family homes
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3–5 years
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Tax benefits
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Fix and rent
Investing in Multi-Family Value-Adds
Hezekiah's multi-family value-add investments involve acquiring existing properties for renovation and improvement to maximize their value. This strategy allows investors to participate in building equity during the value-add phase and subsequently benefit from rental income and property appreciation over time.
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Investors can enjoy the advantages of multi-family rentals, such as passive income, tax benefits, and property appreciation, without the substantial upfront costs associated with individual property ownership.
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Through Hezekiah's syndication structure, investors can participate with a low minimum investment amount, gaining a share of multi-million-dollar properties without bearing the full financial burden. They can leverage the expertise, knowledge, and industry connections of Hezekiah's experienced team, who oversee the project from inception to completion.
The Benefits of Investing in Multi-Family Value-Adds
Stability
Real estate historically shows lower volatility than the stock market and often outperforms the S&P 500 historically. This is due to factors like tangible asset value, rental income potential, and portfolio diversification benefits.
Equity
Improvements and renovations can directly boost property value, thereby increasing your equity stake in the investment.
Cash Flow
The monthly rental income received from residents plays a crucial role in covering various property-related expenses, including mortgage payments, property taxes, maintenance costs, and other operational expenditures. This steady stream of rental income not only ensures the financial sustainability of the property but also serves as a reliable source of passive income for investors. By effectively managing and maximizing rental returns, investors can benefit from a consistent flow of income while building long-term wealth through real estate investments.
Appreciation
Investors can reap significant benefits from the appreciation of real estate values over time. As properties appreciate, investors can realize capital gains upon sale, providing a hedge against inflation and opportunities for further investment.
Tax benefits.
Since the property is held long-term, your income is taxed at lower long-term capital gains rates rather than higher earned-income rates, offering tax advantages for investors.
The Process of Multi-Family Value-Add Investing
Choosing the Right Property
With years of industry experience, our expert team has devised a proven system for maximizing profits in real estate. It begins by identifying properties with significant transformation potential, sourced through avenues like property auctions, probate courts, and pocket listings. Rigorous due diligence, involving analysis of numerous properties, precedes offers on select ones with exceptional yield potential.
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We target up-and-coming submarkets with strong amenities and growth indicators, focusing on existing, well-priced multi-family properties with 50 units or fewer. These properties are chosen based on factors like mismanagement, below-market rents, or underperformance, presenting opportunities to increase rents and value.
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For instance, if a property is only 70-80% occupied, we immediately renovate vacant units, attracting higher-paying tenants. Similarly, turnover among existing tenants allows for renovations, improving unit quality and enabling rent increases while reducing turnover rates. This strategy enhances property value and long-term profitability.
Securing the Property
Upon identifying a property meeting our criteria, we establish the LLC to hold the property, secure financing, handle all title and escrow documentation, and finalize the transaction. This comprehensive process ensures a seamless closing. Investors are invited to participate, claiming ownership stakes in the property and benefiting from its potential returns.
Renovating the Existing Property
After purchasing the property, we initiate the renovation process, focusing on enhancing both the interior and exterior areas. This includes updating facades, landscaping, lobby, hallways, and lighting fixtures to improve the overall appeal. Additionally, we assess individual units for renovation potential, with upgrades such as cabinets, countertops, flooring, and fixtures to meet modern renter preferences.
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The initial renovation phase typically spans 12-24 months, with ongoing unit remodeling as tenants vacate during the rental period. Whenever an unrenovated unit becomes vacant, we promptly remodel it, enabling us to lease it to the next tenant at a higher rate. By remodeling vacant units, we aim to stabilize the property and attract tenants willing to pay higher rents.
The Rental Holding
Our seasoned team oversees every stage of the process from inception to completion. This includes negotiating financing, securing loans, advertising the property to potential tenants, conducting thorough tenant screenings, managing the property management company, and handling all accounting services. These services encompass quarterly investor distributions, 1065 tax filings, and Schedule K-1s, ensuring comprehensive management and transparency throughout the investment journey.
Timeframe
The estimated timeframe for a multi-family value-add investment spans 3-5 years, incorporating both the renovation phase and the subsequent rental holding period. This comprehensive process begins with the initiation of escrow for property acquisition, followed by a meticulous renovation period lasting typically between 12-24 months. During this phase, our team focuses on enhancing the property's appeal and functionality, ensuring that it meets the needs and preferences of potential tenants.
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Once renovations are complete and vacancies are filled, the property transitions into a stabilized state, marking the beginning of the rental holding period. Throughout this period, which typically extends for 2-3 years, investors start receiving quarterly distributions from rental income generated by the property. This steady stream of income provides investors with a consistent return on their investment while also allowing for the accumulation of wealth over time.
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As the rental period progresses, our team closely monitors various market factors, including general market conditions, prevailing interest rates, and buyer demand. These factors play a crucial role in determining the optimal timing for selling the property. When the conditions align favorably, and it is deemed advantageous to sell, investors are promptly notified. The property is then listed for sale, and upon a successful sale and escrow closure, investors receive their distributions within 10 business days.
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By providing investors with a detailed timeline and transparent communication throughout the investment process, we aim to ensure a smooth and rewarding investment experience while maximizing returns and minimizing risks.