INVEST WITH ELM TREE COMMUNITIES
Elm Tree Communities specializes in investing in multi family properties in areas that are a 3-hour drive from our Old Saybrook, CT office. We seek investment opportunities where unemployment is low, rents are consistently increasing, and property values are rising. Special situations for ground-up development in the Class B category are also our targets. We also seek investment opportunities in markets where historically multi family investment has been underserved.
Investment Criteria #1: Risk Profile/Investment Strategy
There are four investment strategies in real estate: Core, Core Plus, Value-Add, and Opportunistic. Value-Add typically offers medium to high returns, and leverage is usually between 50%-75%. Value-Add is Elm Tree Communities’ most desirable investment type and one that most investors favor as well as it falls in the middle of the risk-and-reward spectrum. By managing the amount of construction in value-add investments, we can adjust the risks investors are willing to take, and determine the best risk-adjusted return.
Regarding the Value-Add strategies, Elm Tree Communities is looking for a way to increase the property’s profitability and can do that by either lowering expenses or increasing income. Increasing income can be done by renovating the exterior of the building (such as painting, roofing, porches and siding), adding new technology to create a seamless tenant experience, adding or renovating amenities, and strategically renovating the unit interiors to reflect the demands of tomorrows’ tenant.
It is important that Elm Tree Communities sticks to our investment criteria and not deviate from them for two reasons:
It will give us more creditability when we communicate to brokers what we are looking for in an investment opportunity.
Sticking to a specific investment criterion will help us stay focused and specialize in a specific asset class.
Investment Criteria #2: Asset Class
Elm Tree Communities targets Class B buildings, which are generally 10 to 30-years-old that are well maintained and have little deferred maintenance. They are typically located in relatively desirable locations by tenants.
Investment Criteria #3: Deal Size
Elm Tree Communities seeks multi-family deals consisting of properties with 50-125 units, with a total capitalization of 2 to 25 million. Within this criteria, Elm Tree Communities will be able to function as the property manager for all its properties utilizing the latest in digital property management software.
Investment Criteria #4: Hold Period
Elm Tree Communities seeks to hold our properties for 5-7 years.
Investment Criteria #5: Returns
When it comes to returns, the two main metrics Elm Tree Communities uses are Cash on Cash Return (CoC) and Pre- Tax Internal Rate of Return (PTIRR). Over a hold period of at least 5-7 years, Elm Tree Communities looks at investments that yield: 15%-18% PTIRR and 6%-10% CoC.