Our Investment Criteria

What makes a good an investment in our eyes?

Rule 1 – Location & Market

We search for properties located within a 2-hour drive of Central PA. We want to be able to visit and check on the investment with ease. Real Estate is hyper-local.  You could have the same property just blocks apart and they could attract totally different types of tenants.

Rule 2 – Location – Population Growing? Variety of Employers

We start by looking BestPlaces.net and checking the stats on the zip code of the subject property. We look at the population trends, unemployment trends, income, median home price (is trading up to a home not much more expensive than renting?) and more.

Rule 3 – Cap Rates

We like to see cap rates of 8-9% when looking at properties.

Rule 4 – Positive Cash Flow

The property has to produce positive cash flow. It must be an income producing property. We are not banking on appreciation. Appreciation is out of our control. What we can control is the management of the property. Including our expenses, maintenance and rents charged and rents collected leading to positive cash flow.

Rule 5 – Cash on Cash Returns

Today’s Passive investors like to cash on cash returns of 8% or higher, paid quarterly.

Rule 6 – Internal Rate of Return

We use XIRR to calculate the IRR, which takes the date of the inflows outflows of cash into account.

Rule 7 – Focus on capital preservation.

Which is why we choose multifamily. Everyone will always need a place to sleep at the end of the day. It will always be in demand no matter the swings of the economy.

Rule 8 – Exit Strategy

What is the exit strategy? Time frame? We target a 5 to 7 year hold period. With the potential for a refinance of the original debt, to return investor capital and provide nearly infinite returns.  We calculate the sale on cap rate of 1 point higher then what we paid for the property.  (a higher cap rate equals a lower sales price (we are assuming the worst)).