Small Investor, Large Complexes!

[Ivan Guillen]

Multi-family real estate has become oversaturated, especially in major cities. How is a small investor supposed to compete with large investment firms? The answer is simple, don't look in the same places they are. Major cities all typically have the same problem, there is an undersupply and extremely high demand. Think back to your high school economics class, this scenario causes prices to skyrocket. This tends to weed out the small investor, because there is typically not enough liquidity in their corner. Or the small investor will buy a bad deal because that was the only opportunity remaining in their market.

So how does a driven investor scale out and acquire large multi-family complexes? Stop looking at major cities where large firms are dumping their money. A strategy that my team has taken on is looking into tertiary markets for opportunities. We are all local to Indianapolis, and have noticed unreasonable values placed on Large MF complexes. Since we are still relatively small we looked into markets within 1 hour from the city. This brought 500+ deals to our desks, and we scoped all of them out virtually within a week to ensure they met our criteria. Of those 500+, only ~40 met our criteria desired so we drove out and walked all the complexes. We narrowed these down to 8 properties that seemed most viable, and contacted all the owners.

Currently, we are in talks with an owner and keep looking to move forward with a deal. If we would have looked solely into major cities, then we would have surely been out-offered by any competitor in the area. Tertiary markets are the bread and butter that no one seems to scope out, and allows for more leverage in negotiations on the buyer's behalf.

What markets are you looking into? How do you scope out deals? What are your thoughts on tertiary markets?

Look forward to hearing your thoughts!