You need to understand where your prospective tenants will come from and what is happening in that area such as layoffs, new companies coming, university students, etc and income levels. Then look at the multifamily properties that are catering to the target market you want to work with. Then look at pricing. Remember, real estate is locational and the value depends on location for multifamily as well as residential. Where does this property sit in relation to its price, the prospective tenants, condition, and management? I work in two university towns only 5 miles apart, but worlds apart with regard to investment properties and price. Ann Arbor(University of Michigan) is upscale and prices are higher, low cap rates(lower than 7.5%), rents higher and different economic levels than Ypsilanti(Eastern Michigan University) which is more the middle class clientele, lower rents, higher vacancies, lower prices, higher cap rates demanded(10%+). Some people want to buy workout properties with upside potential, some want to buy a cash stream that is fairly predictable. The price should reflect it. They are all good deals if the current and future situation and potential reflect a reasonable price.
Sep 24, 2009