Multi family market study

[Andrew Caldieraro]

Hello, I’m looking to possibly build a cookie-cutter/basic, small apartment complex (10-20 units, one level, no basements, etc.) in a local town. The cost of living and the population is fairly low (5000 people in the town), so I’d like to have a basic market study done to help verify that there is a need for this. Any suggestions on who I should be looking at for a market study? Can I do this basic research myself (there are only 8 units of apartments in the whole town, all of which are full)? Is a market study needed for this? I appreciate your help!

[Sam Grooms]

First, even if there is demand, does the project make sense? If cost of living is low, how are you getting a good return on investment, with construction costs so high right now? Are you getting a deal on construction? Are you getting affordable housing grants from the city/state? Usually, new construction is going after the higher class rental market, for the project to be feasible. 

If there are only 8 apartments, you can likely do the study yourself. I would contact the property managers and ask for occupancy history and rent history. If they're smaller operations and don't have this readily available, maybe you can get copies of their historical rent rolls and create it yourself. 

Usually you'll want information on new construction permits, completions, absorptions, etc as part of your market study, but it doesn't sound like you'll have any of that in this town. I'm not sure how helpful a traditional market study will be. Look for multiamily advisors in your nearest big city. You can engage them to perform the study, but find out exactly what they'd be able to do for you, first.