Buying a good deal in a weak market- Jackson, MI

4 Replies

I am ready to buy my first small apartment building and looking for deals in the 20-50 unit range.  I live in China, have family and a few duplexes in mid-Michigan and I have found a 24 unit deal with strong numbers in Jackson, MI (a city I know little about).  Everything I read about the Jackson market suggests it is bleak at best in terms of employment, pop growth, quality education, ect.  

To what extent does this matter if the numbers and tenant occupancy rates for my targeted deal are strong?  Hoping to hear some opinions regarding buying a good deal in a weak market.  Any specific experiences, positive or other, that others have had in Jackson, MI would be welcome, as well.  

Hi Tina,

I’ve lived here my whole life and I know the area well. I’ve actually been in that building. If you have any specific questions about the area or the building PM me.

Jason

@Tina Herman , you'll want to look at trends, not just last year's occupancy. Don't just focus on occupancy when looking at trends, either. Have rental rates been decreasing to keep occupancy high? You might not be able to see that in your typical T12 P&L (you'll only see cash collected), so ask for the rental roll from a year ago, and two years ago.

Also, look at economic vacancy, not just physical vacancy. Is their physical occupancy high because they're giving more concessions?

@ Jason Rogers- thanks again for your support

@Sam Grooms - this is great advice.  I will be sure to always cross-reference strong occupancy data with consecutive yearly rent rolls to be sure the property's income history is, at the very least, just as stable as its occupancy history.  

Do you have a decent enough amount of cash flow that if there is a hiccup you will be fine financially?  I don't think you are going to be getting as much appreciation in Jackson, like you can in many other areas of Michigan.  It's too far away from other areas with appreciating prices.  So, IMHO, you are weighing whether this deal is better than a deal where more appreciation may come into play. 

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