Timing. Leverage. Competition. TLC. All three play a significant role in completing multifamily acquisitions. It's similar to the old adage for printing services- quality, speed or price; pick any two. Seldom will a single investment property transaction present positive attributes in all three categories.
Real estate, and multifamily real estate, is a slow moving asset class. When the stars align a sale can be completed in perhaps five to seven working days. The norm is 45-60 days. And like any transaction with multiple moving pieces it ain't over till its' over.
TIMING. There is no such thing as perfect timing except for in hindsight. Timing multifamily buys is no different than attempting to time the stock market. It can happen, But even the "smartest guys in the room" blush when their great buy hits a yield-popping home run.
Timing has to do with availability of product and financing. It's the big "so what". So what if there are deals for sale by the boatload, yet no mortgage loans. So what if mortgage money is plentiful when available inventory is mostly old and dusty.
LEVERAGE. Availability of debt plays an important role in the ability of most buyers to acquire. As CMBS has died off (with a possible comeback pending) and mortgage underwriting has become tighter than most Cuban cigars, the average buyer is removed to the sidelines in favor of all cash buyers.
There are two types of all cash buyers: smart ones and everybody else. My guess is the 80/20 rule applies here whereas twenty percent of the all cash buyers really understand the multifamily asset class and eighty percent are following the herd.
Like people getting into gold at $1,400 an ounce (this being their first purchase ever) or condos in Brazil to flip. How many of the people buying these products really understand their valuation? Perhaps two of ten. Maybe.
COMPETITION. Defining competition is really market specific. Every buyer in the world, even hungry buyers, will not buy a deal in New York City. It doesn't matter that current supply is tight, new construction is limited, incomes are rising, unemployment is dropping. The market is of no interest to that wealth management group in Rockville Maryland tasks with buying deals in the Washington DC market.
Contrary to this example, I would bet the commercial brokers in Charlotte know that on any deal of size they can expect offers from group #1, group #2 and group #3. Why? Because these three groups bid on everything in that marketplace.
It is important to know your competition by market and by asset class and size. Certain buyers only look at value add, others only iron-clad Class A. Thus, it's important to know the competitors in your market(s) and know their criterion.
About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. We discuss best practices in multifamily management and methods related to how to buy apartment complexes. Our focus is sharing strategies and tactics that can be implemented and measured. For more information, visit: www.MultifamilyInsight.com
Sherman Residential Announces Acquisition of 299-Unit Axis Kessler Park Apartment Community Located in West Dallas, Texas
PointOne Holdings Partners with Brand Properties to Develop a 312-Unit Multifamily Community in Metro Atlanta’s Gwinnett County
Lexerd Capital Management Acquires Spring Valley Club Apartments in Panama City and Avenue 29 Apartments in Tallahassee
JLL Income Property Trust Acquires 240-Unit Sienna Suwanee Town Center Luxury Apartment Community in Suburban Atlanta Market
The latest multifamily industry news
delivered to your inbox
DALLAS, TX – Sherman Residential announced its acquisition of Axis Kessler Park Apartments, a...
ATLANTA, GA - South Florida Real Estate Firm PointOne Holdings has partnered with Atlanta’s...
PANAMA CITY, FL - Lexerd Capital Management, a New Jersey-based sponsor of private equity funds,...
ATLANTA, GA - JLL Income Property Trust, an institutionally managed daily NAV REIT, announced the...
JACKSON, MS - Carter Multifamily announced its acquisition of the 392-unit The Reserve of Byram for...
TUSTIN, CA - The REMM Group started 2021 by adding two new multifamily communities to their...
TAMPA, FL - Robbins Property Associates, a vertically integrated multifamily owner operator, has...
FLAGSTAFF, AZ - Olympus Property announces the successful acquisition of Mountain Trail, a garden...
The latest multifamily industry news delivered to your inbox.