After a few out-of-town trips from summer into fall, I’ve been actively nagging my broker friends. They haven’t been selling a lot of properties this year so they’re eager to do a deal. They’re contacting owners, nurturing them along in their process, and bringing properties to market.
I have been seeing a lot of them, underwriting them, and expect to be able to offer them to our investors soon!
If you’re new to Cardinal Oak Investments, please connect with me soon so we can talk about your goals and I can help us determine if real estate investing is a good direction for you. My contact information is at the bottom of this email.
The properties I see that I’m interested in are larger multifamily apartments, 50 units or more, mostly stable, and in desirable communities. I see a lot that have 20, 30% or more vacancy, and those are not properties I’ll buy. They could be great opportunities but not what I’ll be taking on.
Want more insights? When do we expect to present an investment opportunity? What returns do we expect? What markets are we looking in? Click the Schedule link below to set up time with me. I enjoy those conversations.
Market update
Louisville, KY – I know a metro area has good investment prospects when I meet investors who focus almost exclusively on that market. I have met a few who target Louisville like that. They practically own that market, at least they believe they do. It’s reassuring that there are a lot of good things going on in a market like that.
When you scratch the surface and research this market, you discover reasons for people to move here. Start with a mild climate, “sub-tropical” is what they call it, because it’s in the south. Maybe upper south but still south, right along the Ohio River border with Indiana. Culturally more south than north.
That’s important because the first thing to know about your investment market is the laws. How inviting are they to investors, and how well do they respect the financial and labor resources that investors bring to their community.
Why are the laws in the south more inviting to business and real estate investors? Don’t ask me, but they are.
Kentucky is one of the most inviting states for real estate investing. Louisville wants to build and grow, and that’s not likely to change any time soon.
Population in Louisville has grown 43% over the last 20 years to 1.2 million people. Jobs have grown also but not to the degree that many red hot markets are growing. Jobs growth averaged a decent 3% year-over-year in the months after the pandemic, and has now been averaging about 1.6% over the last 12 months. That’s not bad as it means they’re holding their own.
As you know if you study different larger metro markets, none of these markets have an identify that is consistent across their whole metro. Take any major city, say Kansas City, Seattle, Atlanta, and you’ll have awesome areas of town, and not-so-awesome areas. It’s hard to paint the whole town with the same statistic, although if your market has declining population and declining jobs growth, that’s hard to overcome.
Louisville has some dominant employers, UPS and Ford, who aren’t going anywhere. Ford has nearly 15,000 employees in two plants and UPS over 25,000. These companies continue to expand, especially Ford which is ramping up its highly profitable truck plant. Other employers are what you would expect to see in big southern cities: Norton Healthcare, 14,000 employees, public schools and the University of Louisville, a perennial basketball powerhouse with eight Final Four appearances.
Louisville’s status as a bourbon capital is not to be ignored either, regardless of your drinking preferences. It is home to 13 distilleries and the world renowned Bourbon Trail. The State of Kentucky claims over 100 different bourbon brands and produces 95% of the bourbon consumed around the world. The reason that’s important to you, a real estate investor, is because bourbon sales are growing. Liquor sales grow well when the economy’s good and better when it’s bad. You want to invest in markets with stable employers? This is it.
Recent Articles Worth Sharing
Please note, these links might require a login but the accounts are free to create.
The Twisty Turny Future for Multifamily
Multifamily has some challenging times in 2024 — depending on where you are and how you approach it. Apartment List has a list of predictions for
Read more
Mid-Priced Apartment Demand Soars Amid Economic Uptick
In 2023, the U.S. multifamily market has seen a significant upswing in renter demand, especially for mid-priced apartments rated three stars.
Read more
Markets Aren’t Always Right About Rate Cuts
Some cooler heads are cautioning that any reductions in rates by the Fed will take longer than many assume.
Read more
Finer Points of Multifamily Properties
Flat-Out FALSE things your Broker might tell you
I am all about great broker relationships, and the brokers I talk to will confirm that I take an interest in them. I love ‘em and want them to make money, and couldn’t do my business without them.
I’m not about to trash any of them, even though, like any profession, there are good ones and ones who should find other jobs. But here are a few things they say that you should ignore.
“Practically all the multifamily product in this market has already been renovated.” Ugh, just can’t stand hearing that. It’s pure laziness on their part because that can’t possibly be true. The first reason is that renovations are shades of gray. Not black and white. Is a unit renovated? Well, sure, we renovated it – we replaced the appliances and epoxied the laminate countertops. What about the bathroom vanity, flooring, lighting, outlets, cabinets, on and on. Maybe what they did was right at the time and they got a decent rent bump, but the chances are high that there’s a lot more that could be done.
It’s also very likely that they hardly even touched at least a few of their units. We always try to leave “meat on the bone” for the next owner. Most are buying for upside opportunities, although we see a lot of coupon clippers today, wanting to earn a nominal return that’s reliable but not have to put a lot of additional investment into it.
“Completely renovated” Another line that is almost never true. I have passed on properties where this was in the Offering Memorandum, then later learned that this was baloney. I always check out how much renovation was actually done.
I bought a multifamily property two years ago that I looked at and passed on a year earlier because the OM said it was fully renovated. When they didn’t sell it (no surprise), the owner held it for awhile, then listed it with a different broker.
This new broker was honest about its condition, which meant he had a truthful conversation with the seller. The seller had to be fully aware of the condition of his property, so that the broker could be truthful with buyers.
We did our inspection, could see that nearly all the units needed to be renovated, and our offer price reflected the actual condition and work needed, not an optimistic and unrealistic assessment of the current condition.
We bought it, renovated it, leased it up, and it’s now a fantastic asset.
“The seller is expecting a price of $X and the bids are coming in pretty close to that.” This is a tough one. You have to know your broker. Clearly they want maximum pricing, but when you hear this, you don’t have enough information yet. Don’t be desperate for a property and make a bid that’s too high. If you don’t have a relationship with this broker, you might not get the real story on the deal.
Make your offer. Maybe the seller’s expected price is a good one, you’re early with your offer, and you can tie this up before any competition gets in there. Go for it.
More likely, you are trying to get it for less than their asking price (or “whisper” price). Make your offer at that lower price. Nearly all brokers will give you feedback on your offer. They’ll tell you the seller should like your offer, or you’re not even in the ballpark, or somewhere in between. How aggressive do you want to be, that’s completely up to you, but you can make a nominal increase in your offer and get better feedback. The broker will see you’re seriously interested and that you probably have the ability to increase your offer even further.
They’ll push you, so be firm with your strike price, which is the top price you can possibly consider paying.
At this point you will have a better idea of your chances of success because you’ll have had more conversations with your broker. All that BS about “this is the price the seller expects” is out the window. Now you have a much better idea.
I learned this by selling a property. The broker selling our property shared with us how they respond to buyer inquiries. They were responses I always suspected but now I knew their devious methods!
What have you heard from brokers that was just too crazy to be true?