Leon,
You’re welcome and I am certain you will persevere if you persist. Please keep me updated as to your progress and feel free to reach out with specific underwriting help when you find something worthy of a deeper dive.
After reading your questions and re-reading my initial response, I hope I didn’t paint with too broad a brush when it comes to the clientele for Class B-/C properties. We have some very good tenants in our property that falls into this class. That said, it only takes a few to make for big headaches. My experience is that we simply have more problems with the tenant base at our class B-/C property as opposed to the Class B+/A- asset we own. This despite a very thorough tenant application/screening process.
At the Class B-/C property, we experience a higher level of incidents and-or disputes between the tenants, more occasions of requests for rent payment extensions (i.e. “hard luck” stories), a lower level of caring with respect to the rules and the surroundings, etc. etc. In general, a more transitory environment where we more often than not, run into the “professional” tenants who know how to game the system. This is not to say we don’t run into these problems at the Class B+/A asset, it just doesn’t occur at the same level or frequency.
I don’t think there is increased vacancy in Class B/C properties as a result of Millennials and Boomers being absent, or in short supply, in tertiary markets. In fact, I actually see Class B/C assets out-performing a lot of Class A properties in a lot of secondary markets. While supply plays a part in this dynamic, in my opinion the increased exposure to vacancy will be at Class A properties in tertiary markets, not Class B/C assets. This is primarily related to there being a limit to the number of higher paying jobs in non-major metropolitan areas.
Finally, it’s pretty well accepted that jobs and population growth go hand-in-hand. People go where there is work. Follow and analyze a market’s employers (or lack thereof), and you will be off to a pretty good start towards having a grip on the type and level of housing that will be in demand. In turn, you will then have an idea of what to expect in terms of your tenant base. As a rule of thumb in the MF world, with better paying jobs comes better performing tenants.
My advice is to partner-up with someone who has done a MF deal or two. To meet this person, you should try to expand your network as much as possible. Start by attending REI groups in your area (or start one if absent from your market). You can also travel to areas that have established REI investment groups. Continue to be active on BP forums. Check out Michael Blank's programs and join his Slack group. Join a mastermind group. Basically, do as much as possible to get yourself "out there".
While expanding your network, I would also be thinking about your approach to the people you will be meeting. You really want to figure out a way that you can add value to someone else’s goals and pursuits. If you can identify a way to help other people do any of the following, you will be much more likely to find a MF partner: sourcing deals, sourcing capital, securing debt, underwriting and due diligence, execution of a value-add program, securing the operational side, etc. etc. The key is to listen to others and identify their needs.
Keep at it and let me know how things progress.
