Effects of large developments on small markets

[Philip Cook]

I'm in Stevens Point, WI which is a much smaller community that most of you are probably investing in. There are about 26,000 people and in 2017 there were 5,365 rental units. There are three large apartment developments under construction. One is 113 units, another 88, and a third that I can't find numbers on.

There is an 8 plex that I am interested in, but I'm a little worried about the effect that a sudden 5-6% increase in the supply of units will have on rent values and vacancy. It sounds like some of the older investors in the area are seeing this as a good time to retire. How do I analyze the situation to help ensure I don't end up with a half vacant property that I'm loosing money on?

[Jordan P.]

@Philip Cook

Hi Phillip, we’re investors in the Point area as well.

I think it’s be wise to ask yourself if it’s going to pull the same tenant demographic as the newly constructed units; very possible that there won’t be competition between that 8-plex and the new construction because of rent, location, etc. That said, we’ve heard a substantial amount of anecdotal evidence that quality rentals are nearly impossible to come by in Point or Plover (everything is full) and that people are having to rent in Rapids to find housing. Point seems like a landlords’ market, even with new rentals coming in. Lastly, if you invest time, thought, and effort in quality marketing aimed at your key tenant demographic, that should help eliminate vacancies.

Best of luck - Point is a hot market and competition is fierce!

- Jordan