Multi family markets

[Seth Mceleney]

I am considering investing in a overbuilt market, my theory is there will be more deals and more to choose from. I talked to a local broker and he said apartments with good management are 98 percent occupied or better. Can you think

of any pros or cons I should take into consideration?

[Taylor L.]

I would be very skeptical of information from a broker that does not pass the sniff test. What is the economic occupancy? That is, the percentage of occupied units with paying tenants

He may be citing physical occupancy, at 98%. In this particular market, are property owners able to evict nonpaying tenants? If not, that keeps physical occupancy up while economic occupancy could be low.

What about rent concessions? In some overbuilt markets, property owners have to give big move in incentives to stay occupied, because there are so many options for tenants to choose from. There can be a lot of tenant turnover as tenants move around to shop for move-in concessions. That comes with costs to make ready units as well.

I think you need more information to support the conclusion that that market is still healthy.