underwriting Indianapolis and Kansas City deals

[Jason Malabute]

I keep getting beaten out on these cash buyers and 1031buyers and it's driving me crazy.  I am actually underwriting correctly: 1. using the property manager's average expense per unit projections ($5000-5500) 2.    using the property manager's rent projections 3. 6 months of operating reserves 4. physical and economic vacancy never dipping below 10% (kc and indy long term vacancy is 10%, but currently is around 6-7% according to costar)   5. I'm using 3% rent growth (before the inflation craziness of 2021-2022 multifamily rent growth in both markets averaged below 2% for 20 years . Rent growth in indy at 16% and kc is at 8% according to Redfin currently YOY, but rents are trending down. 6. if you are looking at 40-180 units, in a b/c+ area in indy or kc, and built between 1960- 2002 cap rates are at 6-7% today and they are moving up 

How are people winning deals making sense of their underwriting paying $100k per door in Indy and KC? How can I  be MORE competitive and still be conservative ?