So with 6 years of experience working for an acquisitions company in various roles (from prop management to accounting) I've decided to take the plunge and start hunting for my own properties. A roadblock I'm encountering, however, is that the market I'm in (Utah) and most of the other markets I'm interested in (Idaho and Colorado) are at the top of the market cycle in late expansion/hypersupply. What do you guys do to find good properties in a market like this? What strategies do you use to maximize returns for investors? I've heard of shorter holding periods with more flexible loans, is that all there is to it though?
I am looking for multifamily, not single-family, properties. Thank you everyone!
The best path to success in a hot market is finding a method to source off-market deals.
Figure out why they are selling, provide them a superior solution. Maybe you aren't the best price, but to many time is money and if you can make it easy AND CLOSE quick.... you might beat out higher offers.
@Connor Lee Wen Relationships with brokers/agents/property managers to source off-market deals. You can also work on the capital raising side and partner with experienced operators.
Maximizing investor returns is a factor of your cost of capital. For instance, retail (50-100K) type investors are being offered value-add deals (by experienced syndicators) around the 15-18% IRR, at this stage of the cycle. Mega public REITs have a lower cost of capital and underwrite to 4-8% IRR as their cost of capital is significantly lower. Hence, there is one way to say where investor returns are being maximized as each investor has different expectations.
@Connor Lee Wen you cannot guarantee returns especially if a correction happens. But if you buy a property with a story, undervalue, with under market rents and ability to do some rehab to increase rents then you should be above water once the tide goes out.
I know it’s tough starting out. Because you don’t know what’s what. And you only really have to chose from sucker deals.
I started out buying turnkeys and it got me started but they were not the aforementioned. And thus I’m selling them before the tide goes out. I would suggest starting small then jumping in now we are in the 9th innining of an 11 inning ball game.
Thanks everyone! Great advice!