Investment strategy
Residential multifamily property, underwritten against adverse scenarios and held for the long term.
Market
The firm’s current market is Cleveland, Ohio. Purchase prices there remain low relative to rents, which allows a property to cover its operating costs and debt service from existing income rather than from projected rent growth or appreciation.
Within the city, the firm buys in established residential neighborhoods with steady rental demand. Each acquisition is underwritten to a cash-on-cash return of 8–12% at current rents.
Asset type
Residential multifamily buildings of two to twelve units: large enough to spread vacancy across several households, small enough to underwrite and inspect unit by unit.
| Building size | Typical financing | In the portfolio |
|---|---|---|
| 2–4 units | Residential mortgage | Current acquisitions |
| 5–12 units | Commercial loan | As the portfolio grows |
Underwriting
Before an offer is made, the property is modeled under three adverse conditions. If it does not cover its costs in the downside case, the firm does not buy it.
Vacancy
Income is modeled with longer vacancy between tenants than the seller’s figures or local averages suggest.
Interest rates
Debt service is modeled at higher interest rates than the loan being quoted.
Maintenance and capital work
Repair and deferred-maintenance costs are budgeted above the seller’s estimates, with a reserve for work the inspection may not reveal.
Operations
- Hold period
- Properties are bought to be held for five to ten years or longer. The firm does not buy to resell.
- Renovation scope
- Light to moderate: repairs and improvements that affect rent, safety, or the life of the building. The firm avoids speculative renovation and over-improvement.
- Management
- Day-to-day leasing, rent collection, and maintenance are handled by Progressive Urban Property Management. The firm sets budgets, approves capital work, and oversees performance.
How investors participate in each property.
Investing with Fairmeadow