Anyone finding Value-Add Multifamily?

Question

Has anyone been able to find good value-add multifamily opportunities in South Jersey or NJ in general? Any price range is fine, but especially interested in apartment buildings around 1.5M.

Lane Kawaoka · Answer

Secondary markets with robust economies. @Deep Patel

Rome Wells · Answer

Indeed cap rates, beginning to make less sense... Multi-family owners will start waking up soon that the longer they wait for the less they will get paid...

We can either wait this out until the recession hits... and then dive into it... or strategically chose to buy in places where cash flow and upside potential is feasible...

Majority of deals that I am seeing do not justify the price... especially with rising interest rates...   Which are going to increase again this March.  One other way for numbers to make sense though is to bypass brokers.

Jeremy Marek · Answer

I tend to agree with @james wise, we are near or at the top of the curve. Especially as interest rates rise, it's unsustainable, because the cap rates that sellers are asking won't cover a 1.25 debt coverage ratio that most lenders require. Almost all Multifamily investors I speak to are in a holding position. Every day interest rates rise, sellers will get less and less for their properties. They are going to have to start entertaining reasonable offers. This isn't investment advice, just my 2 cents

James Wise · Answer

Market is up all over the country. IMO we are at the top of the cycle for multi family. As such value ad deals, especially those of that size are super rare right now. Gotta search long & hard for the opportunities. IE big marketing budget etc...

Anthony Tulino · Answer

Hi Deep,

I’m looking for the same but in Central NJ. Unfortunately nothing attractive yet. The CAP rates owners are asking for don’t make sense, in my opinion.

Fradel Schaechter · Answer

I am a newbie here, but I can agree that taxes here in NJ can very often wipe out any potential cash flow in a deal.

@Deep Patel: would you consider investing in another state? I don't know much about other markets, but perhaps broadening your search for the 1031 exchange can help you find the cashflow you seek.

Stephen Kappre · Answer

You are in my neck of the woods. Lately I have worked on (buy/sell/rent) smaller multi's, mostly duplexes. Some where fine and needed minor repair, others needed complete rehabs. Around here it all depends on what your business model is and what you can handle, what neighborhoods you want to be in, etc. I haven't found as much lately in 4+ units. Some but not much, and often they are too pricey. A good amount of mixed use though.

Vaughn Smith · Answer

@Deep Patel Taxes are often a cash-flow killer in NJ. You may be forced to look at lower income areas where the property taxes and the properties themselves less expensive. The numbers tend to work in these areas ad sometimes there are government subsidies or tax breaks to sweeten the deal. The question is are you comfortable investing in those areas. If not, I would say that the advice @Lane Kawaoka offered may be the way to go.

Deep Patel · Answer

@Lane Kawaoka Thanks for the response! Any specific markets you are keeping an eye out for at the moment for such properties? Getting ready to do a 1031 exchange at some point this year...

Anyone finding Value-Add Multifamily?

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