How do I get Off Market 100+ unit apartments?

Question

I have a client who is pretty picky. They want to invest in 100-400 unit apartment complexes in southern cities out to Arizona. The cap rate has to be 7% or better. What is the best approach?

Greg Scott · Answer

The best approach is to set your client's expectations better or drop your client.

Finding a 7 Cap on a large property is very difficult at the moment.

Dan Travieso · Answer

Manage his expectations by letting him know what the market conditions are now. He either needs to accept reality or you need to move on to other clients. Nothing wrong with "firing" a client....

Chander Mishra · Answer

Another aspect of this business is setting the criteria for which type of Clients you would accept in your work. If you start working with every person who wants to buy multifamily you would be wasting a lot of time. Choose your clients wisely.

Rich Somers · Answer

99% of deals that transact in this space are through a broker so your time is best suited building relationships with the good brokers in your target market. Unless you're buying super distressed assets in bad areas, you can generally expect to be paying anywhere between a 4.5%-5.5% Cap for B/C type product depending on market.

For example in the markets we are in: Cincinnati, Indianapolis, Louisville, and Nashville, A-/ B assets are generally trading in the 4.5%-5.5% Cap range. Down south in more competitive markets you can expect to pay a lower cap.

Good Luck!

Rich Somers · Answer

I'm referring to multifamily 100 units +

Lee Ripma · Answer

@Opio Sokoni

I agree with what others have said about clients unrealistic returns relative to the market. When you do reach these potential sellers some might say I’ll consider an offer but I’m not going to sell if I don’t like the number. Then you’ll bring the owner the offer of 7 cap on actuals and they will say - no thanks, I could sell for a 5 cap listing it on the market. And then you’ve wasted a whole lot of time. If you don’t have a realistic buyer they should 1) do this legwork themselves 2) wait until the market condition changes 3) change their purchase price expectations so they can buy.

People who own 100 unit apartments are sophisticated, they know what they have and they know the market price of it.

Steve Morris · Answer

Calls - Lotsa calls to owners.

John Lu · Answer

@ Rich Somers，I appreciate you sharing your data of cap range. what kind of property are you referring to? is it single-family house, multifamily or 100+ unit apartment?

Taylor L. · Answer

Great point. Someone looking for 100-400 units at 7 cap these days is either very savvy or very un-savvy. Very savvy being they know anything like that will be a very hairy deal, or very un-savvy in that they're using numbers that are way out of line with stabilized properties in decent markets these days. Typically you can bank on the client being the latter.

Chander Mishra · Answer

Finding a 7% cap rate will be a tough deal. Finding such a deal will be a challenge unless it is a deep value add. So try talking to your client and dig deeper into what is behind the criteria? and what kind of returns they want?

How do I get Off Market 100+ unit apartments?

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