baby-boomers mismanaging MF buildings? Is this an opportunity

baby-boomers mismanaging MF buildings? Is this an opportunity

Real Estate Agent · Atlanta, GA · Member since 2017 · 86 posts · 71 votes

Wanting to hear opinions surrounding the hypothesis that there will be HUGE opportunity in multifamily investing over the next 5-10 years as baby-boomers begin to sell their multifamily properties (specifically in the self-managed 10-40 unit buildings). 

Is this a reasonable thought? I am a year and a half out of college and currently own 2 single family rentals in Atlanta. I am looking to strategically move into the multifamily space as quickly as possible to take advantage of the large-scale baby-boomer disposition movement that is and will be taking place over the coming years. A hot topic on BP and similar podcasts is "taking over apartments from mom&pop and burnt out landlords", which aligns with the theories written about in Dave Lindahl's Multifamily Millions. 

Do we think that this movement is also creating an opportunity for seller-financing? I want to believe that lots of baby-boomers are tired of sell-management, but still want "mailbox money" every month in the form of interest.

Has anybody seen this theme recurring in their personal investments?

With all of this said, my goal is to get into multi-family property in the southeast by leveraging these theories. Let's connect if you have had experience re-positioning underutilized apartment buildings.

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Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
7y

@Anthony Fontana It seems entirely plausible. I bought a property from a younger-than-me baby boomer! He did offer to carry some paper but I did not take him up on that. Currently, as units turn over we are renovating lightly and raising rents to market. The building has been maintained in an exemplary manner. I am currently on the hunt for more MF opportunities; but they are scant here in the PNW. The younger generation-millenials-do not seem to value home ownership and should be a great opportunity to fill apartment buildings provided they are located in the re-emerging trendy areas they prefer. Maybe a perfect storm? ;<) 

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  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    7y

    @Anthony Fontana It seems entirely plausible. I bought a property from a younger-than-me baby boomer! He did offer to carry some paper but I did not take him up on that. Currently, as units turn over we are renovating lightly and raising rents to market. The building has been maintained in an exemplary manner. I am currently on the hunt for more MF opportunities; but they are scant here in the PNW. The younger generation-millenials-do not seem to value home ownership and should be a great opportunity to fill apartment buildings provided they are located in the re-emerging trendy areas they prefer. Maybe a perfect storm? ;<) 

  • Real Estate Agent · Atlanta, GA · Member since 2018 · 24 posts · 19 votes
    7y

    I believe this is a likely scenario that will play out over the next decade. Students coming out of college are saddled by student debt now more than ever, to exacerbate the situation younger millennials are now more than ever placing a higher priority on flexibility in the work place and their living situations leaving many of them choosing to rent over seeking out home ownership; This paired with boomers looking to divest their investments into a more "hands off" approach helps create the perfect storm for young investors ready to take advantage of the multi-family climate. I think you and Lindahl both make compelling arguments for this outcome. I too am looking to take advantage of this opportunity in the coming years by re positioning small to mid-sized multi-family communities around the Atlanta area and potentially other tertiary markets in the SE. Lets chat, feel free to shoot me a message.

  • Rental Property Investor · Chicago · Member since 2018 · 613 posts · 1k+ votes
    7y

    Great points above by all. Somewhat tangent to this subject and probably a bigger attribute to the overall landscape than the mom-n-pop owners of a 6 unit, is the concept of baby boomers driving rental demand and ultimately lower SFH housing demand:

    https://therealdeal.com/2018/07/20/could-baby-boom...

    https://www.propertymanagementinsider.com/baby-boo...

    From the first article I linked, baby boomers currently own $32M homes, or 40% of all homes in the US. This is more than double the preceding generation and Fannie's estimates shows that almost a third will end their homeownership status by 2026 and another third by 2036. It is doubtful the upcoming generation will have the financial capacity or desire to take on this inventory (for multiple reasons) which can cause large price drops in SFH "all other attributes being equal."

    Fannie's predicting 10 and 20 years into the future, which will obviously cause accuracy concerns, but the numbers are there.

    Yes, I agree there will be a lot of elder mom-n-pop landlords ready to retire and get rid of their multi-family unit, but there will also be a lot of buyers waiting to make overpriced offers as more and more people get into the MF game. I think the more more dramatic opportunity will be the millions of baby boomers ready to move into a multifamily facility that is catered into their life-style, thus creating rental demand and lowering SFH suburban housing demand. My two cents :)

  • Rental Property Investor · San Antonio, TX · Member since 2016 · 87 posts · 31 votes
    7y

    I totally agree with having an opportunity NOW and that there are many mismanaged small MF properties throughout the US. However, i think that it is not only this particular point in time, it think it has always been there (30-40yrs). Nevertheless, the opportunities are out there.

    I have been doing a lot of direct mail to small multifamily properties (8-30 units) over the last year and had a lot of success. Pretty much all of the properties i have closed on, were retiring age persons that were tired of "managing" the property and ready to move on. Sometimes the seller finance works, sometimes they just want the cash and disappear. 

    There is a gap in the multifamily space. A LOT of investors are focused on 1-4 SFH, which i dont like as it is based on comps. And then you have the big dogs playing in the 100+ unit space, which is hard to compete with. So there is an unattended gap between say 8 to 40 units (maybe 60) and there is not that much competition.

    Lindahl's book is good, i also recommend Big Profits with Small Apartments from Lance Edwards. 

    I have repositioned a few properties with Lindahl's and Edward's principles. 

    Invest Differently,

    Mauricio Ramos

  • Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
    7y

    @Anthony Fontana

    It very well could happen and I believe in setting yourself up to take down those properties if and when they become available. But I wouldn't sit on the sidelines waiting for something that might happen. They might also prefer to pass the properties onto children/family members - who knows.

    I do think the opportunity for seller financing will be great with these properties if they become available.

  • Real Estate Agent · Atlanta, GA · Member since 2017 · 86 posts · 71 votes
    7y

    What have people found to be the best practices for finding mom-n-pop landlords that are "burnt out" or ready to sell? @Mauricio Ramos mentioned that he has had great success using direct mail marketing? Has anybody had success using other specific strategies?

  • Realtor · Atlanta, GA · Member since 2015 · 266 posts · 182 votes
    7y

    @Anthony Fontana

    I totally agree as my last 2 apartment community purchases have been from mom n pop owner (1 off market and the other from a broker). They are highly motivated and easy to negotiate with some seller financing if you come across the right one on the back end.  This is who I specifically target when looking for these apartment deals although they are hard to come by at times. So I don't do any direct mail, I simply pull list from list source and skip trace the owners directly and cold call them. With my experience directly mail has been costly and a waste of money finding  these off market deals, although many people have had great success, I no longer choose this method. Best of Luck!!!

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