What do investors in Bridgeport target for first year gross rent multiple (GRM)?
I am used to a gross rent multiple target of around 8.6 for places in Stamford but in Bridgeport that seems to be very easy to get. Based on historical appreciation Bridgeport lags Fairfield and has higher taxes so you would expect a lower G.R.M., but what seems to be the current going GRM in Bridgeport?
@Christopher Collins Personally I am not a big fan of Gross Rent Multiplier ("GRM").***
GRM is strictly a function of Revenue, where as Cap-Rates (my preference in evaluating a deal) takes into account Operating Expenses ("OpEx").
I think this is especially important Connecticut where OpEx can be high because of 1) high taxes [especially in Bridgeport], 2) the majority of properties are old (requiring more for both reserves and ongoing repairs), and 3) the high cost of labor/service contracts in the state.
That being said - and somewhat contrary to the above - many commercial brokers in CT of mid to large multi-families typically trade properties on a price per unit basis (and the price will fluctuate depending where in B-port).
***Exception to GRM: If you are an experienced investor and understand a certain area and/or have excellent operations then GRM can be a good measure to use. Because if you have strong operations in place and can scale your OpEx (for example, if you have an in-house management company and your expenses are typically fixed no matter how many units you own for contractors, leasing agents, etc.) then you might only be concerned with the rent since your expenses are more-or-less fixed.
Same here @Christopher Collins I would use cash on cash return as well as dollar income per unit to evaluate whether to pursue a deal or not.
I find that GRM is less subjective than cap rates where sellers/agents may use unrealistic assumptions on expenses and repairs. Having said that, what are your target cap rates / cash on cash returns for Bridgeport? General range that is.
Secondly, what do you budget for capex/ normal upkeep repairs for many of these 80 year old multis?
GRM's and cap rates do not measure "returns". Both measure market behavior, nothing more.
While all is true with the above posts if GRM is an important metric to you, I like to see numbers under 4.00 in Bridgeport. With high fixed and holding costs it is necessary to be aggressive with your figures, especially in the neighborhoods which see higher vacancy rates.