Thoughts on the Sioux Falls market?

Question

To all of you who have invested or are looking to to invest in the Sioux Falls market, let me hear your thoughts on the area.

Joe Splitrock · Answer

There is a lot of big players in the multifamily space that have put up massive amounts of units over the last few years. Lots of apartments and town houses that cater to good credit and more ideal tenants. They have the money to let them sit empty and are willing to offer free month or more to get people int. Not that there isn't a place for smaller multifamily, but most of the affordable units are in central part of town where there is more crime and less desirable tenant base. You either need to be very hands-on or a PM that is good at handling those type of tenants, which will cost you.

Prices have skyrocketed for small multi in the last couple years and rents have not moved up at the same pace. That is a challenge for new acquisitions. I am shocked at how fast some of these duplex in crappy areas sell for at inflated prices. I think it is partly desperation of new investors and partly out of town investors who don't know what they are getting. They just see a low price and figure they can add value and raise rents. The problem is with so much new construction close to town, it your competition is within 15 minute drive of any employer. So the "value add" strategy can be a problem because your fighting against competitive properties that are less than ten years old with walk in closets and other amenities that you will not be able to offer in a remodel.

The area has had good population growth and low unemployment for years, so it is a stable market. On the down side, it is not a progressive mindset and the weather isn't ideal, so we lose lots of population due to that.

Obviously I invest here, but chatting with people on BP, I can say other markets have performed better. For me, I like to be close to the investment so I feel invest local even if the return isn't as good. It lowers risk because I can put eyes on the property and allows me to shed some expenses like PM by doing myself.