Renovation Opportunities May Decline in 2018
Digested from National Real Estate Investor
Apartment investors are having trouble finding communities that have not been renovated. But there are opportunities - if they know where to look.
For a few years now, investors have been chasing (and bidding up) apartment communities that they could purchase and then renovate.
But at this point in the cycle, inventory is beginning to decline, according to National Real Estate Investor’s Bendix Anderson.
“Investors continue to hunt for high-yielding opportunities, and value-added renovations of apartment properties have performed well in this real estate cycle,” Anderson writes. “But as the pool of attractive assets shrinks and rent growth slows, investors must be more careful as they assess potential deals.”
Still, it is possible to find deals, if you are looking in the right places. Using data from Yardi Matrix, Anderson points to larger metropolitan, urban cores such as Baltimore and Miami, as places that still have value-add inventory. Markets that have been overlooked by investors in states, such as Texas and Oklahoma, could also offer value-add opportunities.
Regardless of where investors look, they need to know what they are getting into.
“There is a limited set of properties that make good candidates for this type of renovation,” Anderson writes. “Some buildings created in the 1990s can work. Properties originally built in the 1980s, the 1970s or earlier often have problems—such as low ceilings or awkward floorplans—that can’t be fixed with a relatively light renovation [effort].”