Family Rental Property Portfolio – Jacksonville, FL
- Depressed home prices and high rents have led to unprecedented returns in single-family real estate.
Jacksonville Wealth Builders has spent the last several years building a portfolio of nearly 500 properties throughout the Jacksonville MSA that provide an average unlevered cash yield of over 10.5% The distressed home market in Jacksonville remains sizeable and offers significant near-term opportunity.
- The institutionalization of single-family home rentals is causing rapid cap rate compression in many US markets.
Private equity firms, hedge funds, and a variety of other institutional investors (both domestic and foreign) are currently assembling large portfolios of single family homes in order to take advantage of historically low prices and high rents. Phoenix, AZ, for example, has witnessed price increases of 30+% since December, 2011. Pheonix has had less than 2.5 months of inventory on the market and the homes there are selling at 5-6% cap rates.
- Extremely Limited Downside to the Investment
Even if, for some unforeseen reason (terrorist attack, catastrophic natural disaster, etc) the institutional interest in Jacksonville never materializes, the property portfolio will still yield an above-average rates of return to the Investors based solely on cash flow.
- Best-in-class local operator
Founded in Jacksonville in 2006, JWB has become nationally regarded a leader in the single-family “rehab to rental” market. JWB has purchased, renovated, tenanted, and sold nearly 500 local properties. Of those properties, 170 have been in the first 7 months of 2012. JWB currently buys and renovates more single-family homes than any other company in Northeast Florida.
- Scalability and Systemization of the local operator
JWB has designed a system of proprietary software applications that simplify the purchase, renovation, and tenanting of residential real estate. Given the team that JWB has already built, combined with the ease at which individuals can be trained, JWB is able to smartly and efficiently purchase $3-5M of single-family assets each month.
Two potential exit strategies exist. JWB, as the Fund Manager, will monitor the market to determine the most profitable exit strategy and timing for the exit.
- 1. Sell the portfolio as an income stream to a private equity firm, asset management firm, hedge fund, or REIT looking to establish critical mass in the Jacksonville MSA. Cap rates for similar-sized portfolios currently trading in other US markets are in the range of 5-6%.
- 2. Sell the portfolio one-by-one to owner occupants. This exit strategy will take longer, has more transactional costs, and is more labor intensive. However, given the propensity of owner-occupants to pay a premium for the individual properties over an investor, this strategy should produce similar returns to that of an institutional bulk exit.
JWB home buyers Blog11 Dec
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