SFH Renovation
At Above 8 Capital, we have determined that all objective and subjective indicators point to a shift in demand signals from urbanized apartment living to single-family home living. Although we firmly believe there will still be strong occupancy in apartment complexes due to available inventory trailing demand, we believe there has been a psychological shift in the consumer's mind that drives them back toward owning a single-family home as their long-term goal.
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With this underlying assumption, Above 8 seeks to capitalize on this residential real estate sector by acquiring distressed single-family homes and renovating them back to market standards today.
Why Single Family Homes
With SFH supply to meet consumer demand, this asset class is assessed to be a scarce commodity for the coming years. Although there will likely be a slowing of these transactions and appraised value through higher interest periods, this does not mean the demand in the long term will diminish, rather likely become dormant waiting for a more individually friendly rate environment to exist. This provides the fund a unique opportunity to acquire this asset class with less competition in the near term.
How It Fits Into Our Strategy
Above 8 Capital focuses directly on two investment aspects of residential real estate. Appreciation and Cash Flow. SFH renovation is our blended class of asset that allows us to either hold for appreciation or liquidate for lump sums of operating capital. Because SFH value and competition is likely to be highly localized to specific markets over the next few years, each individual acquisition will be assessed as either a buy and hold opportunity or a renovate and liquidate opportunity.
Mitigating Risk in SFH
As in any investment there is no elimination of risk. However, in order to mitigate exposure in this class, all SFH renovation projects will be underwritten to meet minimum debt servicing obligations at below market rate rents. This ensures the company can maintain and hold the property in a value position to then liquidate during cyclical periods of high appreciation and competition.
