Acquisition Criteria

Location

We focus on Emerging market areas with indicators for strong near and long-term economic growth.

Price

We target properties with 40 or more units that can be acquired in the $3MM - $50

Asset Type

We search for C- to B+ class properties located in C- to A Class areas were built in 1970 or later.

Hold Period

Each asset is typically held 5-10 years depending on its unique business plan.

Unit Mix

We prefer to invest in properties where the unit mix balanced between 1, 2 and 3 bedrooms.

Occupancy Level

We look for properties with occupancy levels above 85% for the best lending terms and cash flow from day one.

Emerging Markets

Choosing the “right” multi-family apartment complex to acquire is a critical aspect of Pinnacle Community Capital’s investment strategy. We are diligent in our exploration and focus on opportunities in emerging markets, where jobs and local economies are expanding.

EMERGING MARKETS ARE CHARACTERIZED BY

  • People moving in, rather than leaving the area

  • Jobs being created and moving in rather than lost

  • Rents and property values rising

  • Local government dedicated to attracting jobs

  • Markets starting to absorb oversupply

The following criteria are used to identify undervalued multifamily properties for acquisition, value optimizations, management and disposition.

MARKET SEGMENTS

  • Age: The 18-35 year old market segment is 22% of the U.S. population

  • Income: Renters who earn $40,000 or more annually

  • Price: Where rent is 30% or less of the median income

  • Retiring Baby Boomers are scaling down and enjoying maintenance-free multifamily living

PROPERTY CRITERIA

  • Multifamily residential apartments

  • Pitched roof construction preferred

  • Occupancy above 80% with the exception of properties that require renovation, providing properties are well located and present value-add opportunities

TARGET VALUES

  • Size and Price: 50+ units in the $4MM – $50MM range

  • Returns: 7-10% Cash on Cash, Minimum Debt Service Coverage ratio of 1.25

  • Type: C- to B+ properties located in C- to A areas

  • Property Vintage: 1975 or newer

  • Location: Emerging market areas with indicators for strong near and long-term economic growth

Due Diligence

Each asset undergoes a thorough underwriting process to confirm the current value of the property and project future returns. At the same time, our local teams conduct detailed inspections of the property and surrounding area to ensure our investment strategy is achievable.

Early in the asset evaluation phase, the debt and equity financing strategy is developed based on a number of factors such as property type, scope of renovations, expected hold period and investor objectives. Shaping a strong business plan for the property helps us ensure our investors' money is safe through the life cycle of the investment.

Value-Add Strategy

When we purchase an apartment complex, we are looking for specific opportunities to increase the cash flow in different areas. These are called "Value Plays" or "Value Adding Components". The property is a business, and the more income the business generates, the more it is worth.

VALUE PLAYS WE CAPITALIZE ON

  • Mismanagement due to owner self-management

  • Deferred maintenance

  • Low occupancy level

  • Below market rents and dated unit interiors

  • Lack of amenities (dog parks, carports, common areas, etc.)

  • Poor curb appeal

  • High utility costs and lack of utility bill back to residents

  • Lack of on site or in-unit laundry facilities

WHY MULTIFAMILY REAL ESTATE?

TAX BENEFITS
You are able to claim depreciation as a write off which allows you to offset your profits and income.

CASHFLOW
Distributions are paid quarterly at a preferred rate after expenses are paid.

STABILITY
Multifamily assets are less volatile and outperforms S&P, 401k, IRAs, and other stock-based investments.

LEVERAGE
Distributions are paid quarterly at a preferred rate after expenses are paid.

APPRECIATION
Forced appreciation through strategic value adds increases the value of the property.

AMORTIZATION
Tenants pay down debt while you build equity which leads to long-term wealth.