All Forum Posts by: Eric Lindsey

@Eric Lindsey, before you pin yourself down into a specific niche, why aren't you looking to buy a large portfolio of smaller assets?

I am assuming it is because you cannot afford to buy, say, $30mm of assets all at once.  At the end of the day, keep your options open.  The smaller stuff you speak of is of interest to many newer people because it is what they can afford to get started and grow from.  The smaller stuff is not of interest to bigger buyers because it is still a pain in the butt to try to create scale.

As such, forcing yourself into a "sell as a portfolio" is going to mean smaller/newer people will not be able to afford it AND the larger investors will still see it as more cumbersome to manage than a single, larger asset for the same price.  

Ultimately, I would keep flexibility. The best exit strategy is the one that creates the most profit. At the institutional scale, there are market cycles where portfolios yield premiums, in these smaller assets, while the same could be true, I have only seen portfolio exits of small deals yield discounts due to much lower overall demand, because you are still selling to people who want 10-30 unit properties.

I think this is a great move. Looking at these smaller properties primarily between 5-50 units will help in terms of competition. You will not typically be competing with institutional investors who can typically take smaller margins because of their scale. Another advantage is in the sellers. Many of these properties will be owned by mom-and-pop operators who are tired landlords or looking for their own exit. I think the amount of deals you will find distressed opportunities that are being sold for below market will be significantly larger than large complexes. You will also find financing for these assets to be easier with local credit unions, private lending, and DSCR all interested in lending on this size of complexes. You will still need someone with a high network and a strong track record, but borrower credit will be less stringent than a property with 200 units.

I think the largest cons will be in the management of a smaller number of units over a larger distance. The cost to manage per unit will be drastically higher than if you could spread it over many units.