2-4 units vs. big new fancy apartment complexs COMPETITION?

Question

Hello everyone!

I've been looking to buy my first 3-4 unit property, on the way to look at these mid priced property I pass many new, fancy, apartment complexs. I was wondering if anyone has any experience with the new complexs making it harder to rent out smaller multifamily properties? Or should I just take that as a sign that my area is growing?

Account Closed · Answer

@Brandon  Barnic

smaller complexes (2-4 units) don't have amenities, so you won't be competing with the large, new complexes that offer pools, community rooms, rooftop decks, fitness centers, etc.

In my opinion, it's a very good sign if new communities are being built in an area and if you buy/own a smaller complex, you don't try to compete with them, rather, you offer a safe, clean apartment without all the bells and whistles for less than the fancy complex.

Olivia C. · Answer

OP

One way you can compete with large complexes is to offer apts for age 50 and up only.

Large complexes are usually very noisy with children and loud music.  Middle-age and older want quieter places.  They usually do less damage to the units.  Get special permits if required and add a few grab bars in the bathrooms.

Brandon Barnic · Answer

@Sean S that's a great point.  Thank you.

Brandon Barnic · Answer

Do property classes are just matter of opinion?

Jeff G. · Answer

@Joe Fairless

I just wanted to make cheap jabs at Detroit. :)

Joe Fairless · Answer

@jeff

@Jeff G.sure, for the most part. I'd say any class of neighborhood has people who can miss payments - they just have different situations for why they miss them.  And I actually hadn't heard of E neighborhoods before - perhaps I blocked that out of my mind due to some tragic event that happened to me. :)

I read this somewhere on BP and found this to be a good explanation too:

A = you and your family would live in it

B= you and your family could live in it

C = you and your family could live in it if it were an emergency

D = you’d rather be camping

@brandon

@Brandon  Barnic sorry for the late response - didn't see it until now.

Jeff G. · Answer

@Brandon  Barnic in general when someone says a neighborhood is class A, B, C, D, etc. they're generally referring to one of a few things depending upon context:

• The general level of income of a neighborhood.
• Sometimes very specifically the average credit score of a neighborhood.
• The level of "hassle" an area is likely to give any landlord over things like collecting rent and respect for the property they occupy.

Others are welcome to let me know if I have this wrong. But, I think of them as follows:

• A neighborhood. The McMansion and country club crowd. Yes, some of these people are renters too. Doctors, Lawyers, and CPA's live here. Also very unlikely to miss a rental payment and they may have rentals of their own even if they rent themselves.
• B neighborhood. A well established middle class neighborhoods. Lots of 3-4 bed/2 bath homes with decent yards. Engineers, and highly skilled professionals live here. Unlikely to miss a rent payment unless someone is hit by a bus.
• C neighborhood. This area is distinguished by smaller "cookie cutter" homes, some under 1000 square feet with 2-3 beds/1 bath with few frills. You may have incidental delays in getting rent from this crowd. Some areas are better than others.
• D neighborhood. The low income part of town. "Unlicensed pharmacologists" live here, lots of them. Things "just break" around properties in these areas a lot. Get used to tenants trying to live for free on your dime.
• E neighborhood. Think of the most violent areas of Detroit. Yes, that kind of neighborhood.  And to think, Detroit was once the "Paris of the Midwest," really.

@Joe Fairless do would you consider the above a far characterization of neighborhood classes?

Brandon Barnic · Answer

bump

Brandon Barnic · Answer

@Joe Fairless what do you mean by class B or class C? I as unaware that there are different classes.

how do I find out if the new apartments building are going to create an over supply?

Joe Fairless · Answer

@brandon

@Brandon  Barnic Unless there were grants, for an apt community to be built they need to charge more in rent than what a Class B or C property would charge. Therefore, it could be a darn good thing because it indicates growth in the area and also will drive more traffic your direction when it's time to fill your units.

I see it as a positive unless there is so much oversupply that the new construction has to lower rents to compete with your property (which is highly unlikely but is possible).