Earlier this week in our Multifamily Monday newsletter, I shared some key questions that passive investors should ask potential sponsors:

• What strategies do you deploy?
• How do you challenge the status quo?
• How do you choose markets and investments?

After sending that email, one of our subscribers reached out with a straightforward question:

“Out of curiosity, what are your answers to these questions?”

I realized it’s likely that if I’m receiving this question from one potential investors, others may also wonder how Aligned Real Estate Partners differentiates itself – I shared a quick response, outlined below:

What Strategies Do We Deploy?

We exclusively target small to mid-size multifamily properties with a value-add component throughout tertiary markets in the northeast (particularly New Hampshire). This segment is typically overlooked by more sophisticated investor groups who focus on larger assets in more populated markets.

Why do we love value-add deals? They allow us to achieve a nice blend of ongoing cash-on-cash returns while also building equity through implementing business plans that increase NOI (and ultimately asset value). This approach lets us execute a capital event within 12-24 months that returns meaningful amounts of capital to our investors.

The beauty of this strategy is that our investors can redeploy their capital into new investments in a shorter period of time compared to what pursuing larger assets in more competitive markets would provide.

How do we challenge the status quo?

We reject the common “bigger is better” mindset that dominates multifamily investing. Many GPs (and LPs) believe you need to focus on larger assets, operated by on-site staff, when investing in multifamily assets.

Additionally, our focus on small to mid-size deals allows us to source a large percentage of our deal flow direct-to-seller (via DTS marketing and prospecting). This means we’re buying properties at a more compelling basis than widely marketed larger assets that are typically sold by sophisticated investors to sophisticated buyers.

This approach increases our deal flow, which allows us to be more selective in the deals we pursue. Being picky means we can pay more compelling prices, which reduces our investors’ downside risk while offering more attractive returns.

How Do We Choose Markets And Investments?

We exclusively focus on the northeast (and specifically, NH) for one primary reason: it’s a supply-constrained market that balances growth with limited new development, which creates a market that experiences less volatility during significant growth or contraction in the broader real estate market.

In markets like Texas or the southeast/southwest, building is extremely easy – plenty of land, development-friendly governments, and growth metrics that support absorption. This means supply has a significantly greater impact, affecting ongoing rent growth rates and sometimes causing rents to decline (as we’ve seen in recent years).

While declining rents benefit residents, they make it challenging for multifamily operators to confidently pursue longer-term buy-and-hold deals due to market volatility.

In the northeast, we compete with fewer national buyers because these states often don’t offer the same fundamental growth metrics as the aforementioned markets. With fewer buyers, we can secure better deals than we could pursuing the same strategies in more competitive high-growth markets.

But here’s where New Hampshire becomes our perfect sweet spot – it’s the only state in the northeast with positive population growth. This creates an ideal combination of fewer buyers to compete with, lack of supply, and ongoing population, job, and income growth that leads to continued rent growth.

Why This Matters To You, Even If You Aren’t An LP…

If you’re a sponsor reading this, you need to be able to answer these types of questions with the same level of clarity and conviction. Your ability to articulate who you are, what you buy, and why investors should work with you is critical to building trust and a successful business.

If you’re an investor evaluating sponsors (including us), these answers should give you insight into our investment philosophy and approach. The specificity of a sponsor’s answers tells you a lot about their experience and expertise.