Month: December 2023

Since 1978, apartment investments have produced a 9.3% annual return over rolling 10-year periods. There is not one 10-year period where apartments lost money. This is without using leverage and based on institutional properties and ownership. Apartments have been resilient and are known for stability, not excess risk-taking. Now that values are down from the peak by a wide margin, we must recalibrate expectations. Should they be even higher because of the great buying opportunity? Should returns be lower with more uncertainty and higher debt costs? It depends on the strategy and appetite for risk.

1) What are the top three danger signs you see in deal prospectuses you are reviewing?

1) Negative leverage. Some is ok if the business plan warrants it, but in today’s environment, the focus should be on positive cash flow. 2) Short-term rent growth. Most markets have an influx of new apartment supply which will push down rents and keep them flat. Prudent underwriting has below-average rent growth in the short term. Click here to see the rest

1) Why should I commit funds to multifamily now?

Multifamily is resilient. According to NCREIF, at no point in the past 45 years has apartment investments produced a negative return on a 10-year hold. With values well below peak pricing, this is an opportune time to buy.Click here to see the rest

“He often said that the key to investing success was doing nothing for years, even decades, waiting to buy with ‘aggression’ when bargains finally materialized.” Great investors need to fully believe in their investment thesis and wait patiently to deploy considerable capital at the opportune time.

1) Will Calvera’s ratio of debt/equity for acquisitions change in 2024?

I’m starting to see some acquisitions pencil to 70% loan-to-value (LTV) which is a big improvement from 9 months ago when it was closer to 55% LTV. Our fund has a LTV limit of 75% for any single asset and 65% for the portfolio. We find it promising to be within those ranges as we seek acquisitions in 2024. That means more properties for the Calvera Income and Growth Fund.Click here to see the rest