User Power
Value/Post Ratio
456%
- Jul 24, 2007
- 4,228
- 19,297
Re: Volucci says to find apts in weak markets due to overbuilding
My experience has shown that location improvements will typically get better results than the value play. But, I want both.
Every area is going to have up and down cycles with occupancy. These cycles have a lot to do with the ability to land a good value play deal as well.
It will be difficult to land a good deal in an area that has a high demand because there will be competition from other buyers. Apartments will sell for higher "proforma" projections. It is also more difficult to locate the mismanaged properties in locations that have strong occupancy.
This is not the case in an area that has been overbuilt or has had a dip in occupancy due to job losses. A five percent dip in occupancy is generally a lot higher in terms of revenue drop. 10% vacancy can easily lead to a 20% total rent loss. Mismanaged properties with 15% or greater vacancy can be in real trouble as a result. There are usually less buyers in this market and sellers get desperate.
If this location shows a promise in near future job growth, it may be that diamond that you are looking for. Find a poorly managed deal and ride the occupancy wave for maximum wealth building.
My experience has shown that location improvements will typically get better results than the value play. But, I want both.
Every area is going to have up and down cycles with occupancy. These cycles have a lot to do with the ability to land a good value play deal as well.
It will be difficult to land a good deal in an area that has a high demand because there will be competition from other buyers. Apartments will sell for higher "proforma" projections. It is also more difficult to locate the mismanaged properties in locations that have strong occupancy.
This is not the case in an area that has been overbuilt or has had a dip in occupancy due to job losses. A five percent dip in occupancy is generally a lot higher in terms of revenue drop. 10% vacancy can easily lead to a 20% total rent loss. Mismanaged properties with 15% or greater vacancy can be in real trouble as a result. There are usually less buyers in this market and sellers get desperate.
If this location shows a promise in near future job growth, it may be that diamond that you are looking for. Find a poorly managed deal and ride the occupancy wave for maximum wealth building.