Southeast Class C Assets

[Mike Dymski]

Below is a decent article on C class multifamily in the Southeast.  It presents (1) the average rent to median income ratio and (2) rent growth for the past 5 years...for 22 Southeastern markets.  Feel free to share your thoughts.  Interesting that my market (Greenville SC) has highest rent/income ratio in the group.

https://multifamily.cushwake.com/Download/File?Pat...

[Jeff Kehl]

@Mike Dymski I really like most of the markets shown on there because of the population and job growth they are all experiencing to a greater or lesser extent. I'm a big believer in overall themes like the U.S. population moving South and West over time and the manufacturing base in the U.S. doing the same because of a more business-friendly climate, lower taxes, and an overall lower cost of living. 

In terms of how the B/C apartment communities will perform in another recession, I'd make a few points.

1) In the last (great) recession multi-family performed about the best of any asset class. people still had to have a place to live and they benefited a lot from move-down evicted households.

2) Lots of people have recognized what I pointed out in point 1 above and so, have bid up prices far beyond where they were prior to the great recession.

3) We have a lack of supply of B/C apartments. Lots of apartments were built in the 60's 70's and 80's but not so much after that. And it takes time to generate a B/C apartment complex :)

4) There are LOTS of people chasing B/C apartment deals and bidding the prices way up. 

5) I try to stay away from deals just breaking even on current numbers and banking on a big rent increase from interior renovations. IMO that won't be very effective in a recessionary environment.

So, generally, I think there are pros and cons to b/c apartments a year or two before the next recession.

As you know, because we look at some of the same deals, I am actively investing in some B/C apartment syndications. But I think now is a good time to be cautious and only invest in the very best deals whereas a few years ago it was like shooting fish in a barrel.

I am also a strong believer in looking at other things to invest in while you 'wait for the hammer to drop'.  I always figure I can earn a risk-free 5% by just paying down debt.