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November 8, 2019

The Lifecycle of a Commercial Real Estate Deal

The lifecycle of a commercial real estate deal is a long one with many moving parts to keep in mind. It’s no small undertaking to source, manage, and sell a property on your own. With DiversyFund, you never have to. We do all the hard work for you with our 100% passive investment opportunities.

Below outlines the lifecycle of a commercial real estate deal. More so, it gives investors insight into their investment dollars at work.

Sourcing the Deal

  • Our real estate team looks for assets that are underperforming compared to comparable communities.
    We source properties with great potential. Meaning, it’s in a great area experiencing trends such as job or population growth. However, the property might be out of date. Knowing that other properties in the area are performing well indicates that the property in question can also do well with the appropriate updates.

  •  We seek opportunities with a double-digit return on invested capital.
    Although returns can never be guaranteed, we aim to acquire properties that provide investors with the highest return possible. 

  • We’re able to leverage our network for off-market deals.
    DiversyFund is able to leverage deals that are off-market. This gives us access to properties with high potential before others do.

Closing on the Deal

  • Funds from investors go towards equity required to close on the deal.
    Capital from DiversyFund investors is pooled together to purchase the properties in the fund. This is done via new regulations in the Jobs Act of 2012, allowing everyday people to have access to real estate investment opportunities.

  • Our real estate team performs full due diligence and outlines all upcoming work before closing.
    During this period of closing, the team will go through and finalize all work to be done on the property. This ensures we’ll add value to the property as quick as possible, which in turn increases the cash flow sooner.

  • DF sponsors and manages the development of the property
    DiversyFund has an in-house team of real estate experts that lead the efforts of creating and executing on the development plan for our deals. This both keeps fees internal and further keeps interests aligned with DiversyFund Investors. 

Asset Management

  • The execution of the value-add strategy.
    This is the fun part. Value is added to the property in the form of repairs, cosmetic updates, and management efficiencies to ensure the property is at peak performance and seeing increased cash flow.

  • This is the hold period where natural and forced appreciation occurs.
    The value-add strategy adds immediate value and is an example of forced appreciation. Natural appreciation occurs over time when the value of the property will increase.

  • Properties are cash flowing from day 1 due to existing rents.
    It’s important to remember that we only purchase properties that are cash flow positive, which is an asset that is generating enough income from rents to cover operating costs. Positive cash flow gives investors risk protection since the property is making money from day 1. 

  • Investors receive dividends from the cash flow.
    Investors receive dividends from the cash flow from properties in the fund. Dividends are received every month on the 15th and are automatically reinvested to take advantage of compounding interest. This is vital to the success of our growth strategy and ensures our investors have the best opportunity to maximize their returns.

Disposition / Sale of the Property

  • According to market conditions, our in-house experts strategize disposition.
    We only sell properties when the timing is right. Our priority is to make sure investors get the most out of the capital appreciation of the property.

  • The investment horizon is ~3-5 years.
    Properties in the Growth REIT are typically held for 3-5 years. This allows sufficient time for appreciation and allows us a window to choose the optimal time to sell.

  • Long-term, growth investments are what we specialize in.
    Growth REIT investors are long-term investors. They are comfortable investing a percentage of their portfolio into the fund while they have other investments that are more liquid if needed.

  • Most of the value is realized at the final disposition because of the value that has been created.
    Although investors see monthly dividends, the majority of their return is seen at the final disposition of properties in the fund.

At DiversyFund, we pride ourselves on providing investors with high-quality investment opportunities. Our investment platform only offers properties that have gone through our strict vetting process and due diligence.

To learn more about the properties in the fund or the Growth REIT offering, visit us here.