Multifamily Isn’t About Cash Flow (And What Divya Smith Focuses on Instead)

On Accredited Investors Only, host Peter Neill sits down with Divya Smith, founder and CEO of Ascending Avenue Investments, to unpack why multifamily investing is far more about long-term equity and alignment than immediate cash flow. Divya draws on a 20-year technology and corporate leadership background to explain how disciplined operator selection, market fundamentals, and investor education form the foundation of a repeatable multifamily strategy.

Who is Divya Smith, and what is Ascending Avenue?

Divya transitioned from senior roles at Target, U.S. Bank, and UnitedHealthcare into real estate with a purpose: to create financial stability for others while building an investor-first multifamily platform. Ascending Avenue has grown quickly—roughly $250 million in assets under management and over 1,300 units—by focusing on operational discipline, partner selection, and clear investor communication.

The core thesis: multifamily creates wealth through equity, not short-term cash flow

Divya stresses a common misperception: many people assume multifamily is primarily about monthly cash distributions. In reality, especially for value-add deals, the real wealth typically comes from the equity event at sale after value creation. Cash flow exists, but it is often modest relative to the upside that accrues when renovations, operational improvements, and market appreciation align.

Key implication: If you need liquidity or an immediate high cash yield, value-add multifamily may not fit your objectives. These investments require patience and alignment around a multi-year hold period.

“How do you feel about knowing that you cannot get your money back until 5 years?”

Operator-first diligence: why people matter more than the spreadsheet

Divya’s underwriting process begins with the operator, not the deal. The top diligence items include:

Track record: Have they completed full-cycle deals and delivered expected returns?
Market fit: Do the operator’s past markets and strategies align with the new opportunity?
Operational capability: Can the team execute renovations, leasing ramps, and cost controls?
Alignment and transparency: Do they communicate regularly and structure incentives appropriately?

Good operators make imperfect deals work and provide thorough reporting when headwinds appear. Bad operators can turn an attractive underwriting into a loss.

Market selection and the practical buy box

Divya favors Sun Belt markets with net population growth and resilient local economies—Dallas-Fort Worth and North Carolina are current focuses. Her market criteria are practical and people-centered:

Population trends: Are people moving in and staying?
Local income support: Within a 2–4 mile radius, can updated rents be supported by median incomes?
Safety and livability: Walk the property, visit at night—would you feel comfortable letting your family live there?

The preferred asset class is Class B to B+ value-add properties where a “large-scale fix and flip” approach—renovate units and amenities over 18–24 months—can justify rent increases and drive equity creation.

Deal structure: how Ascending Avenue aligns investors and operators

Deal mechanics matter. Divya contrasts common sponsor splits and explains how scale influences terms:

Typical market split: 70/30 LP to sponsor.
Ascending Avenue often negotiates 80/20 for its investors when its capital and relationships improve, negotiating leverage.
Preferred returns: target at least 8–9% preferred return for investors, while setting realistic expectations about timing and when distributions begin.

She also prefers a fund-per-asset model. Each fund represents one specific asset, which reduces concentration risk and lets investors select exposure across different markets and opportunities over time.

Qualifying investors and investor education

Investor fit is a priority. Divya uses straightforward qualifying questions to ensure investors understand risk, liquidity, and time horizon:

Are you accredited or sophisticated under the offering?
Is this money part of your emergency fund or safety net? If so, this is likely not the right vehicle.
Are you comfortable with limited liquidity for roughly a 3–5 year hold, potentially 5+ years depending on market timing?

Most conversations with prospective investors are educational. Many are high-income W-2 professionals who value long-term equity gains over immediate cash flow. Clear one-pagers, calls, and frank discussions about downside scenarios help set expectations and reduce surprises.

Risk management and practical mitigations

Divya emphasizes mitigation at every step:

Diversification: Encourage investors to spread capital across multiple funds, operators, markets, and asset classes.
Conservative underwriting: Expect operating costs, insurance spikes, and interest rate shifts; model for stress scenarios.
Active oversight: Walk properties, verify leasing and renovation progress, and hold operators accountable.

Where multifamily fits in a broader portfolio

Multifamily value-add is a complement to stocks and other real assets. Divya observes a cyclical relationship between stocks and real estate—when one soars, the other may lag—so owning both can smooth long-term returns. For most investors, multifamily is a tool for equity growth and diversification, not a replacement for a career or other investments.

Practical checklist for investors considering multifamily value-add

Confirm accredited or sophistication status and ensure the capital is not an emergency reserve.
Ask the sponsor about track record and get examples of full-cycle outcomes.
Request the deal’s buy box, projected timeline for stabilization, cash flow expectations, and exit window.
Verify fund structure: single-asset fund versus pooled multi-asset fund and implications for concentration risk.
Understand preferred returns, promote clarity on when distributions begin, and how waterfall splits work.
Consider spreading capital across multiple funds or sponsors to avoid single-asset concentration.

Final takeaways

Multifamily is long-term equity work: Value-add strategies create wealth at exit more than through immediate cash flow.
Operator selection is primary: People execute plans; underwriting without vetting the team is incomplete.
Investor fit matters: Protect safety nets, set realistic liquidity expectations, and educate before capital is deployed.
Diversify and mitigate: Use fund design, check sizing, and geographic spread to manage concentration and market cycles.

For high-income professionals balancing demanding careers and a desire to build real estate wealth, a disciplined, investor-first multifamily approach can provide meaningful equity outcomes without quitting your job. When operators, markets, and investors are aligned, multifamily becomes a vehicle for long-term financial stability and optionality.

Learn more: Ascending Avenue Investments and Divya Smith are active on LinkedIn and provide resources and investor materials for accredited and sophisticated investors.