Should I buy Multifamily in Dallas now or wait

[Sanjoy V.]

Hi everyone, I am so close to making an offer on a apartment deal that I like. It’s in Dallas Fort Worth area with around 6% cap. Some value add opportunity to raise the rent and potentially exit in 2 to 3 years. Current calculations project and IRR anywhere between 15 to 25%. Should I purchased now or wait until later next year, can expect potentially recession hitting or market correction; where I anticipate having a better deal to buy. In any case a better deal I’m not sure it will mean That Dallas will see any rates in the 7 to 8 range in the next 2 to 3 years. I can still potentially hold the property for 7 to 8 years, I have planned multiple exit strategies. Therefore, is it better to wait for that better deal next year or later where you could potentially buy it at a 7+ cap versus buying what I have now. I am trying to understand the opportunity cost and loss in that here. Is this the time most seasoned investors hold their money and wait for the right opportunity in the next 1 to 2 years? Hoping someone can explain or walk me through the logic and pros and cons of waiting for 1 to 2 years vs buying something now and potentially trying to exit in three years versus holding it a little longer to tide a bad phase if it does occur.

[Ryan Blake]

@Sanjoy V. Unless you have some great knowledge no one else does, I would buy it now. In DFW, investors have talked of a recession for the past 3 years and it hasn't happened yet. It is softening now but is still a seller's market with demand greatly exceeding supply in both rentals and single family. I agree with many of those investors that a correction of some sort will happen but I am under the belief that it will not lead to prices decreasing much but rather stagnating for a few years.

Though @Alvin Sylvain says he is new to investing, he has the right idea. If you think it is a good deal now, I would go for it. DFW is growing and it all hinges on when/if that growth will stop.

2017 DFW added 32,000 new rental units (Source)

From June 2017 to June 2018 35,000 new homes starts (Source)

2018 DFW has issued 19,000 new permits for rental unit construction (Source)

The last of these sources from Texas A&M gives some great detail on market absorption of the new units and demand/vacancy rates. They are predicting a slow down as well but put vacancy rates to be flat and rent increases to go down from 4% from last year to 2% projected for both 2019 and 2020.

If you have a deal that should get you to IRR of 15+% I wouldn't hesitate. It seems like a pretty sound deal.

Hope this info helps.