Broker to me: "Your expectations are too high"

[Mark Neiger]

So I've been painstakingly analyzing multi-family properties for over a year now. It's obviously difficult in this hot market to find anything worth giving a second look. The few properties that have seemed promising to me have sold so quickly and at such ridiculous prices that I wonder if I should even be spending my time in MF right now. The last building that I was recently interested in sold at a 5 CAP at full asking price, 25% vacant and had multiple offers at that price. I've seen hundreds of properties sell in my market and none of them have been anywhere close to my underwriting criteria. Who's buying these places and what returns are they looking for? How and how long can they hold on to these places? When I asked the listing broker why I can't compete with others he told me that my expectations were too high. "Mark, rents have been increasing 10% per year for the past 5 years." OK. How long can that continue and when will interest rates start to go up? How do I deal with that kind of mentality? He makes me feel like an idiot.

He's obviously loving life right now because he's making a killing on his commissions. I had friends in the previous market run-up who were mortgage brokers that were making tons of money too and were cocky about it. They all ended up unemployed and broke when the bubble burst. 

Maybe the MFR market is just too heated right now for a newbie like me. (I currently own SFR) Maybe my focus market is the problem. (Orlando and Central Florida) Many on these forums/blogs/podcasts suggest investing in your own back yard and that's the area I know well but maybe I need to look into other areas.

I've also been guided by many on here that there are certain benchmarks I should aim for; CAP rate 8%, ROI of 12% and DCR of 1.6. The only properties I can find in my market with those kinds of numbers are D class in bad neighborhoods and I don't see any exit strategy.

I really want to expand my portfolio and have the capital to do so but I'm really having a hard time finding anything. Should I try my own marketing rather than brokers? Or should I change focus back to SFR or maybe just hold off on buying anything right now. It just burns me up to have money sitting in mutual funds going nowhere right now and I'm feeling pressure in my 40's to get my financial situation in a better place.

Anyone have any words of encouragement or caution?