Strategy

Zelko Associates’ core mantra for protecting investor capital and providing a solid return begins with our focus on macroeconomic conditions.  We take a top-down approach to investing, starting with our target markets.  Once the macro factors have been vetted, each potential deal is thoroughly analyzed in a stress scenario.  Only those opportunities that provide a strong risk-adjusted return are further engaged.

 

Investment Thesis

Zelko Associates believes we are at the precipice of a generational opportunity in real estate investing.  As smaller operators (mom and pop investors) are aging and are growing continually more tired of managing their properties, they will be looking to unload these buildings to the next generation.  Typically the properties were purchased with retirement in mind – over 10,000 Baby Boomers are hitting age 65 daily.  These properties provide great opportunity because they have been mismanaged – below-market rents, lots of deferred maintenance, and outdated interiors.  For these reasons, Zelko Associates can generate a solid return after acquisition. We can turn around management, raise rents, remodel, and bring additional value.

Our primary objective is the acquisition of multifamily residential buildings.  However, we do see opportunity with single family rentals as well.  They provide great returns, especially in areas where the renters outnumber the home owners 2:1.  Single family homes also serve the function of liquidity as needed.  While the buyer pool for a MF building is limited to investors, owner occupants can purchase single family homes (up to 4 units).  For this reason, there are many more exit opportunities with this asset class.

 

Acquisition Criteria

  • Net population inflow
  • Metro area is a transportation hub
  • Value-add opportunity
  • Strong rental demand – house ownership < 50%
  • Median household income is greater than 3x median rental price
  • Relatively stable real estate market

 

Property Criteria

  • Multifamily residential apartments
    • 1965 or newer construction
    • Some value-add proposition – either through construction or better management
    • Near-term supply stable and not increasing
  • Single family rentals
    • 3 Bedroom / 2 Bathroom
    • Brick construction or vinyl siding
    • Mechanicals < 5 years old
    • Emerging neighborhoods
      • If marginal area, more than 25% of area has already turned
    • No pools or other liability creating features