Many individual investors have neither the time nor resources to approach apartment property acquisitions with sufficient planning and due diligence. More often than not, individual investors do not create an integrated plan to operate the property for a pre-determined hold period, invest capital to enhance value, and finally dispose of the asset. Investors focus too heavily on monthly cash available for distribution, and too lightly on overall return on investment. Finally, many individual investors do not independently verify information provided by the seller as to rental rates, occupancy rates, and demographics of the property and submarket where it is located.
Steady profits in apartment real estate require well conceived financial objectives, life-of-investment planning, scrutiny of key operating assumptions, and accurate financial modeling. For individual investors who don’t have the time or training for this effort, NOI offers the premier pre-acquisition consulting available in the apartment business.
NOI begins by helping the client develop financial goals with regard to the property, and by assessing the client’s financial resources to attain those goals. We thoroughly study the direction of national and local economic conditions, the local rental submarket, and the asset’s positioning within its market.
Next, NOI conducts a "zero-based" analysis of the property’s historical financial statements. Income and expense line items are compared to industry norms and to NOI’s internal benchmarks, organized by location, submarket demographics, size, age, and construction. The current rent roll and in-place leases are reviewed to verify current rental rates and occupancy rates, and to compare them with the competitive set in the submarket. We inspect the condition of the physical plant, assess the capital investment needs of the property, and consider whether there is an opportunity for a value-add investment.
NOI’s assignment concludes with a written report that details our findings and proposes an investment plan for the property, with achievable profitability over a recommended ownership period. We make specific recommendations about capital investment planning. If requested, we suggest best-practice onsite operating protocols for execution of Performance FundamentalsSM, and provide monitoring tools for the client to internally evaluate management practices. After the client has reviewed the report, we strongly encourage a web conference or in-person meeting for the client to raise questions, discuss implementation strategies, or challenge our findings.
Following our report to ownership, NOI offers a number of services to assist the client after the acquisition. We may continue to consult regularly with the client, to monitor execution of Performance FundamentalsSM at the property. We can arrange and supervise a change in property management.
There is a striking difference between the pre-acquisition planning and due diligence performed by institutional investors versus individual investors. NOI makes available to the individual investor the best pre-acquisition protocols in the apartment-property industry, carried out by professionals with superior understanding of onsite property operations. Our pre-acquisition services are invaluable to individual investors. |
