Profitability
Return Expectations
Cash Flow
In general, starting cash flow distributions can be expected to be in the 4% to 5% range. Often, in certain markets, if needed, Ergodio will structure distributions up-front to provide for a priority rate of return to the investor. While owning the property, Ergodio’s goal is to always increase cash flow through management efficiencies, targeted property improvements and rent growth. Rent growth is accomplished by selecting markets in emergence and properties with a value-add component.
Cash flow returns can be expected to rise to a 10% level or higher, through the ownership period. This is accomplished by investing in emerging, rent-growth markets. Investors should rely exclusively on the Private Placement Memorandum (PPM) before making an investment decision.
Resale Profit
There is nothing more powerful in producing higher resale profits in apartment investing than proper market timing. Thus, the saying “you make your money when you buy”. No need to look for that rare extraordinary deal that everyone is chasing or get beaten by a higher offer every time. When you combine increased management efficiencies, market rent growth and market value escalation achieved through selecting a market in emergence, much higher returns can be achieved.
While we generally look for an overall rate of return of 100% over 3-5 years, you must only rely on the information provided in the PPM to determine your investment participation.
Leverage
We use leverage (financing) to reduce the amount of investment and thereby maximize rates of return. Reasonable debt coverage ratios are used to protect capital investment.
“Only when the tide goes out do you discover who's been swimming naked” - Warren Buffett
Repositionings
Occasionally, we undertake a repositioning for higher and quicker returns. These ventures have an inherited higher level of risk. Repositioning opportunities are made available exclusively to our existing investors once we have understood their risk tolerance. Also, in each investor’s case, we limit participation amounts in these ventures to maintain invested fund leverage and deal availability to more of our investors.
