What's 10 Years Look Like?

Hey there,

Here’s a visual illustration of what the endgame of our long-term focused investment philosophy looks like.

Example:

• 64-units

• Purchase price: $3.73M

• Average annual rent increase: 3%

• Long-term fixed rate debt

  • 75% Loan to Value

  • Amortization schedule 25 - 30 years

Starting total equity, less reserves in this example, would be around $930,000. At year 10, that initial equity would be worth around $3.5 million and pay out close to $290,000/year in gross dividends.

So, a $100k investment goes to $374,000 in value and has a gross dividend of $31,00/year.

What’s the key to this, though?

1. Patience (both on the holding time & acquisition)

2. The type of debt (long-term fixed rate)

3. Operating the asset well

Currently, there are a ton of deals and investors that have violated one or many of these rules. They’re struggling, but their hand hasn’t been forced yet…. yet.

Why can we say this confidently?

Here’s an example: at the peak of the 08 crisis, defaults on home mortgages 9.4%… we’re not focused on that, though. We care about commercial mortgages, mainly CMBS loans, which hit a delinquency rate of 10.7% at the peak.

Today, 11.6% of CMBS loans are in distress, with the delinquency rate at 7.8%. The highest since the last recession.

This leads us to be defensive. High-quality deals only, passing on unit count chasing deals.

We have identified 2026 deals for Q1 and Q2 that we have high conviction on. Hopefully, we’ll connect and have great pricing on the properties.

Questions always welcome!

Nate & Steven
Rust Belt Capital, LLC

www.rustbeltcapital.com

_Disclosure:
Rust Belt Capital, LLC is not a Registered Investment Advisor. Investing involves risk, including loss of principal. Past performance does not guarantee or indicate future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. Rust Belt Capital, LLC does not provide tax advice and does not represent in any manner that any outcomes described herein will result in any particular tax consequence. This is not an offer to buy or sell any security. Offers to sell, or solicitations of offers to buy, any security can only be made through official offering documents that contain important information about investment objectives, risks, fees, and expenses. Prospective investors should consult with a tax, investment, or legal adviser before making any investment decision. Distributions or profitable investments cannot and are not guaranteed. Not intended to be tax advice and should not be solely relied upon to make an investment decision.