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Ep. 84: Finding the Right Investment
In this episode of “Kiss My Assets”, Grayson Lupus, digital marketer at Neighborhood Ventures, and Jamison Manwaring, the CEO of Neighborhood Ventures, discuss how they select their investments. Manwaring describes their process as a funnel, where they review numerous potential opportunities to find one suitable investment. They constantly explore deals referred to them or through relationships with brokers and apartment owners. They emphasize the importance of building a pipeline of relationships with individuals in the industry to discover off-market transactions, which are common in commercial real estate.
While residential properties can be found through the MLS, which provides an efficient market with publicly available information, commercial properties, including multifamily, retail, and office spaces, often involve private party transactions. Sellers in commercial real estate prefer more discreet deals to avoid disruptions for tenants and unwanted attention. Companies like Neighborhood Ventures can acquire properties by engaging directly with the seller without creating a public spectacle.
Once they have a pool of potential projects, Neighborhood Ventures narrows it down based on specific criteria. They conduct initial research from their desktop, analyzing public information, satellite images, neighborhood developments, and news articles. They then perform boots-on-the-ground research, driving around the property, observing the neighborhood, and assessing the overall conditions. This process helps them further refine their selection to under 10 potential projects that meet their criteria.
Neighborhood Ventures focuses on properties in up-and-coming neighborhoods experiencing transitions. They seek properties with below-market rents and identify deficiencies they can address to bring the rents up to market rates. The company can generate additional net income by increasing the rent, which contributes to the property's value. They also target mid-market properties ranging from 20 to 150 units, as this segment presents less competition from institutional buyers who typically prefer larger buildings.
Neighborhood Ventures follows a clear investment thesis that has remained consistent over the years. They prioritize properties with three key factors: up-and-coming neighborhoods, below-market rents, and mid-sized buildings. By adhering to these principles, they aim to make intelligent renovations, increase rents, and sell the properties within a timeline of two to three years, capitalizing on the improved net income and property value.