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Updated over 2 years ago on . Most recent reply

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Adriel Cisneros
  • Investor
  • Miami
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48
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Are institutional like returns possible with smaller assets?

Adriel Cisneros
  • Investor
  • Miami
Posted

Hello BiggerPockets community,

As I begin underwriting smaller acquisitions targets in both Logan Square and Englewood, I find it hard to project anything beyond a 10% IRR, CoC above 3.5%, and an equity multiple north of 1.06.

At the moment, I lack the sufficient experience, net worth, and UNHW LP base to analyze larger apartment deals. 

In my view, smaller apartments are ripe for acquisition (i.e market inefficiencies, etc.) since fewer shrewd, sophisticated GPs are available to make offers. 

Hence, less competition. 

However, the pro forma will not appeal to a more affluent LP pool outside of Chicago. And this is necessary before I can accrue the necessary equity to make an offer on a prime opportunity. 

Any thought? 

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Greg Scott
  • Rental Property Investor
  • SE Michigan
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Greg Scott
  • Rental Property Investor
  • SE Michigan
Replied

"Institutional-like returns" to me is the same thing as saying "sub-par".

Large assets tend to attract big money.  Many of the institutions out there are willing to accept much lower returns than I am, so they are willing to pay significantly more than I am for the same asset.  While I prefer owning larger assets, the best total returns I've seen were on smaller assets, both single family and apartments. 

Have you tried looking outside of Chicago?  You may find better returns elsewhere.

  • Greg Scott
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