Market analysis - Tampa Bay MSA

[Bernard Sanga]

Hello!

I am looking to purchase my first commercial multi family property by 2nd quarter of next year. I am looking for smaller deals in the 8-20 units area. I am in the process of market analysis and seeing compressed cap rates everywhere. Feels like there's very little meat on the bone whenever I try to analyze deals that are being sent to me by brokers and those listed in sites like Crexi or loopnet. I am looking to expand a little further outside Tampa/ Pinellas county area.
My questions is: which area(s) are you seeing potential in the surrounding cities? Any leads on where to look? I am seeing better margins going north of tampa. Are you seeing this as well?
I would love to connect with local investors. Any virtual or in person meet ups or masterminds focused on multifamily investing that you can recommend?

Thanks in advance everybody!

[Jed Haslam-Walker]

Hi @Bernard Sanga,

I wonder what you mean by compressed Cap Rates? It could be many different things to different people..

My experience of Multi-Family in the 8-20 market in the Tampa region is that the Caps vary significantly...the most recent detailed market cap analysis I did, by hand, and accurately, gave me a range from 6.25% - 11.85% and that was me excluding 2 deals that were so ridiculously good that it would have skewed my averages.

It really depends on your purchasing strategy - if you are looking for a turnkey operation in an expanding market like Tampa you will experience price pressure. Tampa area purchase prices are one of the 6 most elevated price points of 2020. It would be an unwise strategy to do that, unless you were a hedge fund or a REIT or you were an international group looking to park your money.

The growth in the market is a great thing, it promises continued appreciation throughout the quadrants of Real Estate Cycle and is currently still in the early to mid expansion phase -  all of this is very good but you would need to purchase strategically. I'm in the middle of 2 5+ multi-family purchases in that region with Cap Rates around 6.5%-7.8% and they are incredible deals that will end up making my clients a great deal of money.The deals are there but it requires some experience to see them I think. Many brokers do not prepare their OMs accurately, often the data reported are incorrect and an expert knowledge of the target area on the part of the investor ( or the agent) is essential in spotting a deal that's hidden in the weeds.

Additionally, manoeuvring within a mediocre deal can turn it on it's head. There are many strategies to use.

I would counsel you to pause before you move away from an incredibly lucrative growth area like Tampa to head north where your demographics, infrastructure, target market density and appreciation prospects are compromised. Remember Cap Rates are only one metric to measure a RE investment against.

Hope this helps.