Equity value investing is the acquisition of fixed assets with significant equity on acquisition that can be quickly converted to cash flowing entities. This significant market equity on acquisition will allow for an additional layer of principle security against market dips or stagnation. EVI execution historically acquires assets at 31% (YR2012) of current value. In the past (2008-2012) these assets were treated as short term transactions (flips or EVI 1.0) as the underlying market fundamentals had not stabilized enough to access if a short term dislocation was part of a longer term value bottom for a buy and hold.
Since the financial crash a new paradigm has emerged; fewer Americans are becoming homeowners for a variety of reasons. Of the reasons there are fewer homeowners today, most notable to an asset investor today is that there is not ability for traditional sub-prime lending based on new mortgage laws enacted in the last five years and the lack of fully functioning secondary market for all loan origination. These factors along without positive and meaningful reforms in the government sponsored enterprises to guide the private secondary market and elevated unemployment, there is not expected to be a meaningful resurgence in home-ownership until generational drivers for demand can overtake other market forces as growth drivers.
The new renter class can be divided into two distinct classes; the multifamily and the single family. These two classes together represent approximately 40mm in total American rental housing units at a market value representing about six trillion in value. From an investment standpoint the single family properties present a clearer opportunity today as properties can be acquired significantly below value due to the depth and broadness of the Real Estate crash (greater dislocations in price). This is in contrast to the medium to larger sized property multifamily sector that has generally fared better from a value maintenance position as investing capital early on in this part of the Real Estate cycle determined that the foreclosure explosion would create renters en mass.