BlueSpruce Holdings finds great, cash-flowing multifamily apartment buildings by combing through hundreds of properties in emerging markets throughout the country. Our investor partners passively earn above-average returns secured by real estate, history’s most reliable asset.
We focus on multifamily properties of at least 50 units in emerging markets.
But we don’t buy just any old property. In fact, we look at dozens and dozens of properties before we even make an offer because most properties simply are not worth anywhere near the asking price.
We look for a few key characteristics in two categories. We don’t always find these in every property, but the presence or absence of these attributes strongly influence the purchase price.
Stabilized Cash Flow
These communities are typically in good shape with little-deferred maintenance. They are at least 90% occupied and produce reliable cash flow.
Ideally, there is a light value-add opportunity such as better management, expense reduction, bringing rents up to market or additional income opportunities through amenities.
The property must be in a solid, business-friendly market with 2% growth in population and job creation.
These properties are less risky than those we seek for repositioning.
These communities are not in good shape, but they have potential. They are tired looking, poorly managed and not attractive to new tenants. Oftentimes occupancy rate is less than 80%, and some units may not be rentable because of deferred maintenance.
These investments are riskier, but they have stronger upside potential. With up-front capital investment we can remodel units to modern standards, add amenities, and add landscaping and signage to increase curb appeal. Once re-positioned, these communities generate strong cash flow and within 12-18 months are worth significantly more than we paid for them. At that point we have the option of selling the property or refinancing to pull cash out. Refinancing lowers investors’ cost basis and, if the new debt is structured appropriately, generate high returns against the new cost basis.
Frequently Asked Questions
Do I need to be an accredited investor?
Sometimes, but not always. Without getting too technical, it depends on whether the offering is a 506(b) or a 506(c) as defined by the SEC. A 506(b) allows up to 35 unaccredited investors whereas a 506(c) must accept only accredited investors. If you’re not sure whether you are accredited, there is a good explanation in this article on Investopedia.
How will I be updated on the progress of my investment?
We send out emails roughly once per quarter, as well as one when we announce a distribution.
When do I get paid?
For most of our investments, we send distribution checks on a quarterly basis on or before the 15th of the month after we close the books. This usually means January, April, July and October. However, in some value-add opportunities, there may not be distributions in the first year because the capital is used to fund new construction and re-positioning. We communicate this information before you invest, however, so you will know well in advance whether and when to expect a distribution.
What do you use the money for?
Typically about 80% of the money is used to purchase the property. The remaining 20% is held in reserve for capital expenditures (e.g. replacement of a broken refrigerator) and/or as a hedge in an emergency situation. For example, in the case of a major storm that causes damage, we may need to dip into reserves to cover the insurance deductible.
What is the minimum investment?
The minimum is $50,000, but we can make exceptions on a case by case basis.
Can I invest through my IRA?
Yes, but it needs to be a self-directed IRA. If you don’t have a self-directed IRA, no worries. You can start right now! It’s easy to set one up, but it can take a few weeks to get an investment approved by the custodian, so plan for that extra time when considering whether to invest.
Are there any fees?
Not directly, but when we underwrite and close a deal we generally take an acquisition fee of 2-4% of the purchase price. This compensates us for all the due diligence we perform. Once the deal is closed we take a minority stake in the property that entitles us to 25-40% of the equity, depending on the deal structure.