We changed our acquisition strategy in 2008, and we stopped buying value-add multi family because you could no longer make it work. Rents started trending down. Cap rates were trending up. That was during the first wave of defaults of the subprime market. We saw the writing on the wall, and we started targeting non-performing debt.
If we go out, and we’re just doing 12 and 13 IRRs, which is really what the multi family business is – it’s a fairly low-, to mid-teen-IRR business – we’re really just doing what everybody else is doing, but with our business model, we feel that we’ve been able to deliver outsized returns.
The way we’ve been able to do that is, number one, we make the money on the buy. We buy most of our properties off market, and we buy them at a favorable basis. We buy in strategic markets that are going to experience tremendous rent growth, in our opinion, and our underwriting, and our analysis of the market.
We also do a very deep renovation. Our renovations are significantly better than the other Class-B products in the marketplace. That renovation, even though we’re spending more money, we’re usually able to achieve higher rent and/or optimize our NOI – through reduced vacancies and increased renewals – and ultimately increase the value of the asset.