What’s a Metric You Used to Focus On That Matters Less to You Today?

Question

As investors gain experience, it seems like priorities often change.

I'm curious for those who have been investing in multifamily for a while:

What's a metric or number you used to focus heavily on early in your investing journey that matters much less to you today?

Could be:• cap rate• cash-on-cash return• IRR• rent growth• occupancy• appreciation potential• unit count• something else

And what do you pay more attention to now instead?

Interested hearing how experience has changed the way people evaluate opportunities.

Chris Seveney · Answer

Cap rate is not something I really ever put a lot of attention to, as its a metric that gives you an idea but does not tell close tothe entire story. Take the same property and one needs $1M in capex and the other is fully renovated. same T-12 financials but which one wouldyou look to buy based on a cap rate?

Tyler Nash · Answer

I don't like to count on any rent growth. It needs to work now, and in the future with flat rents for me. Rent growth on top of that is just upside, I don't like to plan on it.

I also don't really narrow down on unit count a whole lot. There's 5 unit properties that can produce as much or more than 12 unit properties, so unit count doesn't make a huge difference to me.

Evan Polaski · Answer

All of those and none of those.  There are far too many facets to consider to focus too heavily on any one of those versus another.

To add more that I look at:DSCRCapex budgetCapex NeedsCrime ratesInplace rentsCredit scores and incomes of tenantsTraffic CountsDevelopment pipeline in areaFee and carried interest structure (if I am looking as an LP)To Denise's point:Sponsors track record within the last 2 yrsWho is actually managing the property? (Most syndicators are not the PM, but the PM often has an equal part in the success of the property as the GP)Performance on current portfolio vs investor presentation

Denise Supplee · Answer

I'm often less impressed by projections and more interested in the people behind the deal. The numbers are important, of course, but execution plays such a big role in the outcome. I've seen situations where a deal looked great on paper, but the results didn't match the projections. I've also seen strong operators navigate challenges and still produce solid outcomes.

What’s a Metric You Used to Focus On That Matters Less to You Today?

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