Any experience in buying pre-stabilied Multifamily properties?

Question

Hi,

We have invested so far in Class C, value add type properties and we received an offer to buy a brand new pre-stabilized property where occupancy is just reaching about 85%.

I understand that buying a brand new property is a completely different ball game from buying and evaluating an older Class B/C product.

Can anyone here provide insight as to what to look for when buying a pre-stabilized property. what are the general rules of thumb to follow and pitfalls to avoid.

Appreciate your help in advance.

Aaron K. · Answer

Do your due diligence, just because it is occupied doesn't mean it is stabilized.  I have heard horror stories of turnkey companies especially filling units with unqualified tenants at higher than market rent to sell the property.  If possible review tenant applications.

James Wise · Answer

Gotcha. Well then what you'll need to do is rely on your market knowledge. As the building doesn't have a history itself you'll need to rely on how other similar buildings in the area perform. If you know that market should be very easy. If it's a new market your unfamiliar with you'll be flying blind.

James Wise · Answer

It being stabilized already makes this a simpler and easier property to analyze no?

Hadar Orkibi · Answer

@Gova Reddy make sure that the developer brought everything to code with the city and everything s signed off.

would they consider seller financing?

why are they not waiting to to sell when they have higher occupancy?

I would still buy on actual numbers and not pay a premium, the new build market in some areas are softening and owners need to give some concessions to fill up the units..

Do some more research on the market itself to see what is the absorption rate in the market? how many new units are built and how fast they are rented out...

Any experience in buying pre-stabilied Multifamily properties?

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