350 unit new construction - competition or upside?
Hey you all. I am under contract on a 24 unit Class C building (one bedrooms and two bedrooms). The owner has been self managing and the property is messy and any work done on it has been "half-***" The building has good bones and with an exterior and interior (per unit) rehab this can be a nice Class B building. The plan is to raise rents from an average of $590 to $715 over 24 months as we do the rehab. Contract price is $1.1M with an additional $300K for rehab. A value add from rehab and professional management.
We just heard that the city just approved a 350 unit apartment building about 2 blocks away. These are going to be Class A with expected rents starting at $850 (studio) to $1600 (2 bedrooms). Construction to start in 2021. There is also a newly remodeled retail location nearby that has a couple vacancies (not sure how long these have been on the market).
The lender we wanted to work with backed out because of this issue. My question for you all: how would you assess our current situation? Our property is in a suburb that is seeing expansion from (Kansas City). It seems that our property after rehab will be B class so won't go after the same demographic as the new apartment complex. Is it a concern that we will be marketing to tenants who can't afford the new "shiny" development (with community center, fitness, etc)? Appreciate any advice on how to think through these issues.