Strategy

COMPANY BUSINESS STRATEGY

Alliance Property Holdings targets commercial real estate investments that provide both annual returns along with additional profits from the determined exit strategy.  Our philosophy on investing in real estate is that great generational wealth can be created through developing as well as acquiring and  holding real estate property long term, allowing investors to benefit from increasing cash flows, appreciation, and the ability to exit at the proper time in the market cycle. Hold times vary but may be anywhere from 2 to 10+ years.

​Choosing the “right” investment to acquire is a critical aspect of our strategy. We are diligent in our exploration and focus on opportunities in emerging markets, where jobs and local economies are expanding, and our investors can capitalize on growth and appreciating assets.

WHY MULTIFAMILY

The renter population is expected to grow significantly from now through 2041. This growth is largely attributable to a shifting workforce/ popularity of remote work and travel, lack of inventory for purchasing homes, more demand to live alone, and barriers and increasing costs to homeownership.  The coronavirus and the higher unemployment rate have impacted the rental market and made renting an attractive option for people who are unsure about their finances.

A recent report by the National Association of Realtors (NAR) said that renter search demand is up significantly. NAR’s renter demographics might be skewed toward frustrated and resigned home buyers, but it shows rentals are highly sought. The National Multifamily Housing Council (NMHC) estimates that there will be 10 million more renters by 2025. This growth will be driven by the increasing number of millennials who are renting, as well as the growing number of older adults who are renting. The NMHC also estimates that the demand for multifamily housing will outstrip supply by 2025, which will lead to higher rents.

As of March 2023, apartment demand in the Southeast is at 96.3%. This is higher than the national average of 95.5%. The Southeast is a popular region for renters due to its warm climate, strong economy, and growing population. Rent growth also remained strong with prices increasing 6.2% in January 2023. When compared to more historical performances, the apartment market’s recent rent growth is solid. Additionally, the annual price increases have averaged 3.4% for 36 consecutive quarters.

THE MULTIFAMILY OPPORTUNITY

  • Strong demand for rental housing: The demand for rental housing is strong and is expected to continue to grow in the coming years. This is due to a number of factors, including the rising cost of homeownership, the increasing number of millennials who are delaying homeownership, and the growing number of people who are moving to urban areas.
  • Rising rents: Rents are rising steadily and are expected to continue to rise in the coming years. This is due to the strong demand for rental housing and the limited supply of rental units.
  • Appreciation in value: Multifamily properties tend to appreciate in value over time. This is due to a number of factors, including the rising rents, the limited supply of rental units, and the increasing demand for rental housing.
  • Tax benefits: Multifamily properties offer a number of tax benefits, such as depreciation, passive losses, and accelerated depreciation. These tax benefits can help to reduce the cost of owning a multifamily property.
  • Leverage: Multifamily properties can be financed with a high degree of leverage. This means that investors can borrow a large amount of money to purchase a multifamily property. This can help to increase the return on investment.

WHY SELF STORAGE

Self-storage is a recession-resistant investment. It is a stable and profitable asset class that can provide investors with a steady stream of income. Self-storage facilities are in high demand, even during economic downturns. This is because people need a place to store their belongings, regardless of the state of the economy. Unlike many other property types that tend to lose tenants and suffer from reduced cash flow during a recession, self-storage facilities are not nearly as affected due to factors such as their low long-term operating costs and diverse tenant base. This means that investors can expect to generate a good return on their investment.

THE SELF STORAGE OPPORTUNITY

  • Low operating costs: Self-storage facilities have relatively low operating costs, which means that investors can expect to generate a higher return on their investment.
  • High demand and occupancy rates: The demand for self-storage has been increasing for a decade and typically have high occupancy rates, which means that investors can expect to generate a steady stream of income. It is a need-based industry because people require additional space for their possessions that they cannot keep in their homes or offices. This need is driven by various life events such as moving, downsizing, renovating, or experiencing life transitions.
  • Diversified tenant base: Self-storage facilities serve a diverse range of customers, including individuals, families, and businesses, reducing the risk of vacancy and loss of income.
  • Leverage: Self-storage facilities can be financed with a high level of leverage, which can help investors to magnify their returns.
  • Recession-resistant: Self-storage has been considered a recession-resistant investment due to its ability to survive and even thrive during hard economic times. The self-storage industry occupancy rates only declined by 2.9% in the 2009 recession
  • Scalability: Self-storage facilities can be easily expanded to meet growing demand, providing investors with the opportunity to increase their rental income over time. The average rental duration of a storage unit is approximately 14 months, with nearly half of tenants renting for over 1 year. Only 17% of storage unit tenants store for less than 3 months and about 4% stores for more than 10 years.

THE DEVELOPMENT OPPORTUNITY

  • Stable Cash Flow: Development of multifamily properties typically generate consistent rental income from multiple tenants after lease up. This provides a predictable and reliable stream of cash flow, which is attractive to many investors seeking long-term returns.
  • Potential for Appreciation: Over time, real estate values often increase, especially in growing markets. With a well-managed multifamily development, investors can benefit from both the ongoing rental income and the potential for appreciation in the property’s value when they eventually sell.
  • Scalability: Compared to single-family rentals, multifamily developments allow investors to build a larger portfolio more efficiently. Owning one building with multiple units can be more manageable than managing numerous individual properties.
  • Diversification: Multifamily real estate adds diversification to an investment portfolio. It’s not directly tied to the stock market, which can help to mitigate overall risk.
  • Tax Advantages: Depending on the specific tax situation, investment in real estate development can offer certain tax benefits, such as incentives and depreciation deductions and favorable treatment of rental income.

OUR RISK MANAGEMENT APPROACH

We enter all our investments with a proper plan, prepared for the unexpected and have a solid idea about potential costs and growth. Specifically, our key risk mitigation approach is focused upon the following components:

  • FOCUS ON INVESTOR CAPITAL PRESERVATION: We develop a strategy to protect investor capital with a variety of available tools. Investment decisions are made with the primary focus on structuring investor capital for safety. Investors do not fear loss of principal, especially in a market downturn.
  • PROPERTY AND FINANCIAL DUE DILIGENCE: We perform thorough property inspections and go over records with a fine-toothed comb. A property in bad condition or full of poorly screened residents is bound to provide financial headaches which we identify and plan for in our purchases.
  • TEAM APPROACH: We have the right team of experts for property inspections, asset management, and financial record analysis. This allows us to effectively predict the costs of:
    • Deferred maintenance (immediate cash needs)
    • Capital improvements (cash reserve needs)
    • Loss of income from vacancy and/or poorly screened tenants
    • Renovations and improvements
  • MARKET RESEARCH: We conduct comprehensive market research at the micro level. Prior to purchasing a property, we know what improvements or new amenities result in higher rents and demand, as well as know what renters want that we can easily deliver for them.
  • PURCHASE RIGHT: We buy the asset at the right price, with the right financing. We ensure that we are not over-leveraged or taking on too much debt, especially in a market downturn.
  • PROFESSIONAL MANAGEMENT: We hire the right property manager for our apartments. Having someone knowledgeable in the market, manage maintenance work, answer phone calls, offer customer service, and handle tenant reviews and complaints is essential to our strategy.
  • REALISTIC BUDGET: We create together a realistic look at property income and expenses during our first year or two of ownership. A pro forma budget analysis is used to assist us to avoid needing to raise more cash in the near future.