Multi Family Oklahoma City?

Question

I am looking at diving into the Oklahoma City market, and hopefully owning a few thousand units within the next year or two. I would love to talk to some people who know that region well. Real well. Looking around, it looks like 8% cap is the norm, so what do you consider good, or amazing deal in the value add space? And where and what should one stay away from in the region? I would love to jump on a call if anyone is interested.

Levi T. · Answer

Well, I did an inspection. The properties have been slummed for a very long time it seems. I found a number of cracks within some of the buildings that had lateral movement, as well as ground water, which means there is likely a broken sewer line somewhere nearby, plus a number of buildings had asbestos siding, and all the roofs have been patched to death, tho they claim they replaced them. Never mind whoever was living in the laundry facilities, and the endless list of small repairs that would be required just to keep it renting, or the fact that it's missing one swimming pool advertised, and one of the other pools is collapsing.. On paper it looked good, but the agents are in California, and so is the owner, and I really don't think they have taken a hard look at it in person. So they think this is a big discount compared to Class-A MF properties trading at ~3% direct caps, when in reality the property has reached the end of it's life, and they need to slice that asking price in half. I tossed them an offer, and they scoffed at it. I'll circle back around in a few months and see if the owner wants to change their mind.

Levi T. · Answer

That is what I am doing, getting more boots on the ground, talking to locals, and experts in the region. Same reason I started this thread. The more one knows, the better IMO. I've already gone over all the T12 to 36 on all these properties, that make a combined 200 units, and already built out my own proforma based off of that. These are solid B/C properties, with 1-3br. All blue blue collar tenants, and I don't expect that to change. No war zones are far as I can tell. I believe the average cap will come in around 6.12% after closing. We even added in extra to bring vacancy rates to 10% for safety. I believe after a few million added, we can get curb appeal improved, and each unit cleaned up a little over the next 36 months, plus install a real management team vs owners operators, thus I estimate we can turn that around to be a 9%. Just trying to connect with folks in the area. I'll be flying in next week to tour everything.

Will Fraser · Answer

Well I hate to start out with a contradiction, but I gotta make sure you're understanding OKC well from the jumping in spot.

8% cap rate being normal is highly debatable and variable.

Depending on location, asset class, size, and other factors you'll see anything as low as high 5's and as high as 12%.

However, you'll see most things advertised 1%-2.5% their actual cap rates, even though most brokers' claim their rates to be "actuals."

Caveat Emptor and all that, but it's all a loss if you start out with the wrong expectations.  So, I'd encourage you to get very granular about what type of asset you want to own here and then set expectations for cap rates and ConC return from that.

Go out there and get it, Levi!

Jennifer Querry · Answer

I’m new to the game - live in Orange County, CA.  My husband and I bought our first SFH in OKC last November and are about to close on our second one next week.  Competition is fierce and most listings are off market within a day or two, with most offers being above asking price.  I got lucky and found a great real estate agent through a referral.  She knows the industry and geographic areas well, and works with many out of state clients.  She responds to emails and texts quickly, gets out to visit properties quickly, will send videos or walk a property with you via FaceTime - she’s awesome and knows her stuff!  Her name is Sarah Taylor with Re/Max...good luck!

Jason Mileshko · Answer

How is your journey coming along?

Colleen Sivets · Answer

@Levi T. I am looking forward to reading how you tours went and what your next steps will be. Good luck!

Will Fraser · Answer

I love it, @Levi T.!  You've got your head on straight and are thinking wisely!

Multi Family Oklahoma City?

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