At Realstone Capital, we partner with private investors to purchase select apartment communities utilizing a simple strategy: “Buy It, Fix It, Sell It”.

BUY IT: We exercise a strategy of putting all our eggs in one basket and watching that basket very closely.

Many investors focus on diversification, which is good; however, such a strategy does not generate outsized returns. Realstone is somewhat geographically diverse in that we purchase properties in multiple metropolitan areas of the central United States. We are very asset type and location specific. Being this concentrated allows us to absorb granular market data especially well. We leave the coasts and other major primary markets to the Big Boys (i.e. Public & Private REIT’s, major pension funds, other institutional capital sources). This approach gives us a home field advantage in our targeted markets. In fact, here are the markets where we are currently focused on buying apartment communities of 100 units or more:

1.       Louisville, Kentucky

2.       Lexington, Kentucky

3.       Nashville, Tennessee

4.       Chattanooga, Tennessee

5.       Knoxville, Tennessee

6.       Little Rock, Arkansas

7.       Indianapolis, Indiana

8.       Cincinnati, Ohio

9.       Birmingham, Alabama

Location and strong submarkets are very important to us when selecting which properties to pursue in these markets. We buy properties below their intrinsic value and replacement cost (i.e. cost of building that real estate); another way to say this is we are real estate Value Investors.

FIX IT: The most important component of our strategy is the “Fix It”.

This is how we create value after buying a property well in an effort generate outsized returns for our investors. There are two main components to this:

1.   Physical

Often we may re-skin an asset (on the interior and/or exterior) to give it new energy. We are very strategic, analytical, and methodical in doing this to ensure our dollars are spent in areas where there will be a tangible and worthwhile return on those invested dollars (e.g. adding washer and dryer connections to apartments built in the 70’s and 80’s that do not have them).

2.   Operational

We are fond of opportunities to add value through operations as we generally don’t have to outlay any cash upfront to realize the upside. For example, this can include such things as things as appealing property tax valuations or buying a property with an out-of-touch owner that has not raised their “recession rents” over the past few years. We go through an extreme amount of market research to determine where the market is on rents for a particular property.

SELL IT: Everyday we’re not selling, we’re buying.

At some point, we have to return our investors capital back to them. We exit our deals in a methodical way over time. We do not have a hard and fast rule on how and when we approach it. The exits can be property, market, financing, and investor driven. Ultimately our goal is to return our investors capital (or at a minimum, a good portion of it, back to them within 3-10 years.) The game plan here can be quite deal specific.

 

Just because our strategy is simple doesn’t mean it’s easy. That is why our investors need us to handle their real estate investing for them while they focus on their primary occupation (just like apartment investing thing is for us), fish off their yacht, cruise the world in their Gulfstream, or merely play with their grandchildren.

By the way, a strong majority of our compensation comes in the form of Carried Interest rather than Fees. This aligns our interests with investors more closely, and we like winning together.