New Apt Building Affect

[John Torres]

I'm new to the rei game, and have been looking to invest in 3-4 unit homes (2 & 3 bdrs) in a small town (5,000 ppl). I just found out that a large(r) apt building is going to be built in the middle of the town (all 2bed/2bath's) Within the next 2 years. If I can snag a triplex/quap at a 1+% rule, would it still be a good idea considering the upcoming changes??

[Richard Haiber]

For example, a brand new class A property will probably not greatly impact a class C property as theyre competing for different rental populations.

You should do your best to determine how competitive you'd be for the same renters as this new building to begin evaluating the impact it would have then study your local rental market. Can your area absorb the additional units?

Because I know for DC, no matter how many class A units for $2500+ the builders build, it probably won't much impact a class C building renting out $1200 units. The people theyre competing for are different.

There's been (and currently is) an explosion of new units coming online. I'm sure that for a period of time it'll have an impact on the demand for all the existing units within range of the new building's rent range. But over time, this market has enough jobs and enough people in the rental market that it'll reach an equilibrium and vacancies shouldn't be a substantial issue even for buildings with similar rents.

In essence, there isn't an answer we can give you except to know the market youre looking to buy in, and determine how X number of units in X property class will impact you.

Smaller markets will obviously have more significant impacts if a new, large building is built.

Hope that helps.