Strategic Buying in Today’s Market
- Nov 04, 2013
By Matthew Heslin, Principal & CEO, Oak Coast Properties
The apartment sector continues to perform. Despite high levels of activity and increased competition for acquisitions, opportunities still exist for savvy investors with appetite, insight and sound strategy. For players looking at both short- and long-term hold strategies, quality acquisitions may still be found in both suburban and urban markets across the country.
Apartment buyers of existing product should focus on key variables when evaluating potential acquisitions, and these will apply across opportunities in both metropolitan and suburban locales. Properties located in sustainable growth-oriented markets will always offer investment benefits. A sustainable recovery and thriving economy coupled with a solid business plan for the asset provide a backdrop for rental growth and ROI no matter what the hold strategy is.
Growth markets feature key characteristics that feed positive absorption and returns in multifamily. Consistent population growth and a diversified vibrant local economy, with solid household income will continue to drive rental demand and, hence rents, upward. When properties boast these positive attributes and are located in high barrier to entry regions they will classify as some of the best assets out there.
To further qualify acquisition targets based on location, it’s important to assess the property’s proximity to regional amenities and services that renters prioritize in importance. Closeness to quality schools and employment centers is paramount. Nearby dining, entertainment and government services will also steer rental demand and ensure a property’s overall success. A potential investor can quantify the convenience rating of an acquisition by obtaining what is called a “Walk Score.”
Once an investor identifies a quality asset within a desirable market, value may be driven through a well-defined strategy. Buying the asset below replacement cost is a key starting point. And identifying either a long-term hold or a flip strategy provides the guidance needed to secure the appropriate debt amount and structure with the right capital partner. Arranging the right capital stack is critical to ensuring success of the project and meeting owners and investors return expectations.
Value-add investment opportunities provide a sweet spot in today’s multifamily arena for active investors. Moving properties up the quality curve (from class C to class B, for example) drives additional value. Improved management, property repositioning, rehabilitation and re-tenanting efforts all catalyze strong upside rental growth potential and, ultimately, a healthy return on investment.
In short, investors with market knowledge, access to the right capital composition and a solid business plan, will continue to source deals in today’s marketplace and drive ROI through strategically identified, quality acquisitions.
Matthew Heslin is Principal & CEO of Oak Coast Properties, an owner, developer and manager of multifamily communities. Visit Oak Coast Properties at www.oakcoastproperties.com and contact Matthew at firstname.lastname@example.org.