Raleigh Vs Greensboro Mid-sized Multifamily

[Cole Farrell]

Hey everyone, 

I'm adding a new market to my focus and I'm between pursuing Raleigh, NC or Greensboro, NC. I'm looking for Mid-sized multifamily with 15-80 units. I'm looking for cash flow more than appreciation, and whichever has more inventory. I'm well aware of the lack of inventory on the market, I mean inventory that is simply built there. I come from a market that physically does not have many of these properties in existence, so this is crucial. I would love to hear some opinions on which would be a better area to pursue and general thoughts. 

Also, Ill be visiting one of these this weekend (Jan 2023), so if you have any recommendations on areas to run through, please let me know. Greatly appreciated!

[Pat Lulewicz]

Cole - you'll struggle to find much small to mid-sized multifamily that cash flows in Y3, let alone Y1, in Raleigh. Trails Corner Apartments in Raleigh, a 57 unit C-class value add just sold for $9.975M ($175k/unit) at a 5.3 cap. Earlier in the year, a B/B-, 24 unit stabilized apartment with some rent increase opportunity on the NE side of Raleigh up Capital Blvd between 440 and 540 sold off-marketfor $4.56M ($200k/unit), presumably around a 4 cap based on my underwriting. Would have probably gone for over $200K on-market. There are opportunities for off-market buys in the 10 and under space especially if you're a cash buyer and can buy a value-add. The other issue is that we've worked off-market with owners to either buy or list their units, and everyone's seen such explosive growth in rent and value, that there's no point to sell...many refinanced during low rates and are now in a position to never have to sell.

Greensboro and the greater Triad market (High Point and Winston Salem, and even Thomasville and Lexington, included) are much more cash-flow markets than the Triangle (Raleigh/Durham). With that being said, the secrets out on the markets and between OOS investors and Private Equity, our Triad prices have shot up in line with Charlotte and the Triangle. Value-add is generally all you'll see come available on-market. We just had a 12-unit, C-class value-add hit the market at $75k/unit, and went under contract in a week, so there's high demand from buyers. Should sell around a 6 cap. Easy cosmetic renovation and rental demand is through the roof for affordable/workforce housing. B-class will trade off-market north of $100k/unit and generally be 24s or 32s (3 or 4 x 8-plexes was the name of the game for developers for a while there). A-class and anything that's a large B-class complex is almost solely off-market to institutional. All of that to say - there's great opportunities here to buy cash-flowing stuff and take it up a level in repositioning.

Happy to send you my analysis of the 12-unit that recently came and left the market. Let me know if you do come down to either market and I'd be happy to show you around.