Would you buy a four-plex with a new apartment building being built across the street?

10 Replies

I'm looking at a four-plex in Baltimore. However there's a brand new apartment building being built right across the street. I'm sure the building will be super high end with high rent (although I shouldn't assume on that, have to do more research.) But I'm just curious if most investors would stay away just because of the competition. The numbers are looking pretty good so it's worth investigating. 

What are you looking to do with your 4plex? If it's the same strategy you'd lose out, but at least you would have free marketing if their prices are too high for them, you can catch those looking for something less pricey but same area.  Just food for thought.

The high end building will have high end rents, which will drive your rents up.

If it smells and looks right I wouldn't question yourself.  What do you have to loose?  Life is too short not to take risks.  

Frank

@Chris Purcell

I'm no expert, but I would probably buy that building BECAUSE of the new building being right across the street.  Chances are you are correct in so far as they are probably building a higher end apartment complex.  This is great news for you on two fronts:

1) it should increase comparable rents in the area.  If somebody wants to live in that immediate area, there are only so many choices.  That building should drive up average cost.

2) not everyone wants to live in a large apartment building.  A four-plex offers a bit more privacy than an apartment building. 

These are just my thoughts, but I'd do it if I were in such a position.

I wouldn't be so concern about the competition. I would concentrate on the four-plex in hand and make sure the numbers make sense as well as the location. If it's in a good location where rental demand is solid, you should be fine and have no problem finding tenants, regardless of competition.

If anything, a brand new apartment building being built might be an indication for the demand in the area! It should also help increase the appreciation of the value of the properties in the surrounding area.

I think if the numbers make sense, (and the numbers don't lie) go for it. Chances are the building means it could be a bustling area. So if you do a little sprucing up, the apartment isn't competition but instead free adverstisement. So make it look good and get ready for the foot traffic. You may even want to go over and introduce yourself, there's always a business relationship to be had...just my thoughts.

I would agree. The new building going up will have fall out of tenants wanting to live in the area. Like it was mentioned it will offer you free advertising. Might even result in you creating a waiting list for your units. 

@Chris Purcell The thing is that there are a lot of renters all with different needs. For example, my buildings are all one story, so there are no stairs. A lot of people hate living in two story apartment buildings. Another example is that my units all have small back yards. That extra bit of personal space is very desirable compared to my competitors who do not have it. Also I allow pets, while many do not. Also my 4 unit in Tucson is actually 2-duplexes on a single lot, so my tenants only share a single wall with neighbors. 

There are advantages that you will be able to give to tenants that other properties in your area may not have. For example more flexible terms on leases.