People with not a lot of time who like the higher returns, cash flow, tax benefits, debt pay down, appreciation, and control, but don't want to do a rehab.
It's true the returns are lower this way but you don't have to spend a lot of time looking for off market deals, you don't have to go through extensive renovations and tenant turnover, and you have cash flow from the beginning.
There are also areas of the country you can bank on appreciation and rent growth even if you do no improvements and the property isn't distressed.
A number of buyers such as REITs, retirees, family trusts, and passive investors who want the tax benefits.
Also, often times 1031 buyers and foreign buyers
@Craig Peterson REITs are the biggest players.
Usually you want to leave some meat on the bone. Say only upgrade 75% of the units and leave the rest for the next buyer. You might even get lucky and sell to an institutional buyer.
@Craig Peterson , I agree with the other comments; a lot of investors are just looking for wealth preservation. For example, a foreign investor with billions of dollars, or a REIT targeted toward retirees looking for somewhere to put their savings. They may just be looking to diversify outside of their 401k and into real estate, at a safe 4-5% CAP. They're more concerned about keeping their money than growing it, and willing to sacrifice returns for more safety.
One of my company's biggest equity partners is a wealthy family in California who has no interest in operating real estate but wants real estate in their portfolio. They just want healthy, cashflowing properties with no headaches and will probably never do a value-add deal themselves but love to buy successful ones.
Thanks for all the feedback everyone, makes a lot of sense now. It was easy for me to picture the retail buyer for SFR, but not so much for apartments. There's a lot more potential end buyers than I anticipated.
Time is money... and to some they have more money than time.
In general, the end buyers are the very very very rich people, who look at it as a CD in a bank.
These non-add-valve complex are not for middle class nor is the flipper, because they are just bone without meat already.
Therefore, I would not touch it.
Are there certain size brackets that tend to be more difficult to sell once their income potential is maximized? For example, I'm thinking a REIT might not really be shopping for a 12 unit complex. Maybe I'm wrong, that's not based on anything, just my gut. Or in your experience are there usually different types of buyers that fill out the spectrum?
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