All Forum Posts by: Lambros Politis

I don’t trust large language models as far as I can throw them. It’s a pretty well-known fact that they are prone to hallucinations and spitting out bad information. I’m simply hoping I can find someone to help me identify a high-yield submarket where people pay their rent on time.

Hey BiggerPockets Community,

I'm currently planning a 1031 exchange and looking to identify markets with strong fundamentals for multifamily investment. I'm focusing on areas that exhibit the following key metrics, which I believe indicate a healthy and growing market:

• 1% or higher annual population growth: This suggests increasing demand for housing.
• 1% or higher annual job growth: A strong job market drives economic stability and housing demand.
• Median salary of $60,000 or more: This indicates affordability and a solid tenant base.

Ideally, I'm looking for markets where these three factors converge, creating a robust environment for multifamily investments.

My questions for the community are:

1. Which specific markets are currently meeting or exceeding these criteria? (Please provide data sources if possible.)
2. Are there any additional metrics or factors I should be considering when evaluating these markets for a 1031 exchange?
3. What are the potential risks or challenges associated with investing in these high-growth markets?
4. How are current interest rates impacting these markets and what future impacts do you forsee?
5. Are there any resources or tools you recommend for tracking these market trends?

I'm particularly interested in markets that offer a good balance of growth potential and affordability. Any insights or experiences you can share would be greatly appreciated.

Thanks in advance for your help!

Best regards, 

Lamb

So then what's a guy to do when interest rates are higher than cap rates in most Class B/C markets? My IRR model looked much better three years ago.

@Josh C. You're not bursting my bubble at all; in my line of work we call that effectively managing client expectations around a stated objective. So, some quick back of the napkin math for the theoretical turnkey scenario you described above:
- Purchase price: $2.5 million
- Down payment: $850K
- Loan amount: $1.650 million 
- Gross Scheduled Income: $288K
- Operating expense ratio: 35%
- NOI: $178K
- Debt service at 6.7% interest = $128K annually 
- Before tax cash flow = $47,1999 
- Cash-on-cash Return in Year 1 = 5.55%
A $47K / year return on an initial investment of $850K seems pretty modest, no? Unless my math is completely off here?  Thank you in advance for any insight you can offer into the matter. 

Robert, tell me more. Ground up development or new construction - what's the completion date on these builds? This would be a 1031 up-leg for me, so I cannot have my sales proceeds sitting in a qualified exchange account for longer than 180 days (45-day identification period).

 So is a 40% operating expense ratio more realistic, Josh?

So an 8% cap on multifamily in a *relatively* stable market with a *fair* tenant pool is unrealistic, even at these elevated interest rates? 

So where am I parking my money? Ohio, Idaho, Tennessee, Indiana, or North Carolina? 

Sage advice from Stuart and Matt. Thank you, gentlemen. I appreciate your time and thoughtful responses.

Thank you, Stuart, for that sage advice. As you know, being an attorney yourself, it can be a Sisyphean task to making a consistent 'good' living. I'm looking to create a slight shift in my lifestyle, where I can ease up a bit on practicing and supplement my income with more passive revenue streams. So, if you were a 'new' investor, but with your current skillset and knowledge base, and had $750,000 in net sales proceeds from a recent downleg property sale, where would you recommend investing in multifamily real estate?