All Forum Posts by: Charles Williams

@Ben Leybovich 

It absolutely makes sense.  It's just discouraging after recently making the decision to transition from single family to multifamily, getting educated with underwriting and syndication, to have missed the apartment asset boat this cycle.

Since I'm a huge believer in the cash flow model I struggle with whether to keep striving for that one off apartment, expand the single family portfolio or shift focus to another asset class such as mobile home parks.  I believe there's huge demand for MHPs due to many economic drivers and have a similar underwriting process with much less expense and headache to apartments.  I don't quite have the monthly financial capacity to wait for that ideal property, I have to create a deal.

Thank you for your feedback, much appreciated.

@Ben Leybovich 

Thank you for the feedback.  For some reason it looks like your reply comments deleted, because I read them earlier but now they're gone.

If I interpreted your theme correctly, it's essentially a waste of time to pursue most C class mid size apartment complexes in the flyover states and SE US.  Class A & B property CAPs seem to be seriously compressed even in tertiary markets so the numbers don't make sense there either.  May I ask how you're pursuing your syndications, as I'm on a very similar journey and seem to be running across similar issues with valuations?  5 hours research per crappy "deal" seems like a quick path to burnout if the near term flow of reasonable projects seem dire.

Do you think we're too far along this market cycle to discover and acquire sizable portfolios?  One off "needle in the haystacks" are possible I guess, but no way to build a business.  My goal was to acquire several complexes within this size range but it's seemingly discouraging as each day passes and we move further along the cycle curve...

@Ben Leybovich  ,
I've been intrigued by your comments for awhile but this one finally led me to
pipe up since your data seems very similar to a property I'm currently
reviewing and your conclusion seems drastic. I hope I've missed something huge because I've been searching right in the heart of your seemingly "no mans land" of 80-120 units in that region...

Anyway I coincidentally also just received info for a 126 unit in a mid Atlantic state just
west of a city that starts with "C" and ends with "otte". High distress and
average rents in the $500 range, supposedly class C. After 15 mins research I
discovered property was directly beside a housing project and area SFH resales were
in the $15k to $25k range, which are flags for me being a bit rough area. I didn't pursue further based on this but I would love to better understand your underwriting analysis.

Furthermore I am very curious to your post synopsis and trying to grasp the full
meaning.  I think what you and @Serge S.  are stating is that the relatively high
fixed operating costs for a lower rent class C (& certainly D) properties of
this size essentially render them worthless since expenses will typically exceed income (negative NOI).

 
Would your hypothesis then extend across all Class C 100ish unit properties in the $500 rent range? How is this possible as there are many successful operators in this
space throughout the southeast and Midwest in this average rent range with similar "average" expenses for each category as you state in your most recent article "Most Apartment Buyers (and Sellers) Are Suckers"? Or are there? Your analysis seems to infer that these properties cannot be profitable, which I find surprising.

Your additional statement of 160 units potenitally being profitable further implies that
there is a deviation (+ and -) from 126 in which income exceeds (more units) or expenses
decrease (less units) enough to where the math does make sense.  There seem to be crossover points as you increase from 4 units (profitable) to 126 units where these properties are unprofitable, then inflect back again where 160 units are indeed profitable. Am I following your assumptions correctly?  If not, please align my reasoning.