Identifying Lucrative Value-Add Multifamily Opportunities as the Cycle Lengthens

The appetite for value-add multifamily investments remains strong—and in light of this increasing competition, many investors are struggling to identify and secure assets that present high-reward opportunities.

While some investors have turned to extreme measures, including taking on projects that require extensive remediation and complete overhauls—or even repurposing entirely different product types for multifamily use—some of the greatest opportunities for growth and stability lie in strategically identifying and refreshing functional, yet under-managed vintage communities.

With a strong sourcing and repositioning plan in place, investors can still take advantage of opportunities to acquire ‘diamond-in-the-rough’ multifamily properties that present high potential for growth at this point in the cycle. We’ve included a few strategic approaches below:

Select submarkets with sustained growth and livability

Top-of-mind for many multifamily investors is the current point in the real estate cycle and impending market correction. The good news is that we’ve been in a slow growth economic cycle for several years, which has recently been bolstered by changes in policy and new employment opportunities.

Consequently, we anticipate continued upside for the next few years, and further, that many multifamily markets across the country will remain resilient even in the case of a downturn.

The key is selecting submarkets that are experiencing increasing population growth year-over-year, job growth that includes the influx of a diverse mix of employers and those that are located in regions that present a high quality of life—vibrant areas where today’s multifamily residents want to live.

For example, we recently added the eleventh apartment community to our Portland, Ore.-area portfolio in just over three years. The greater Portland market demonstrated strong fundamentals that brought it through the economic downturn of a decade ago relatively unscathed compared to many other markets, and we have been particularly bullish on Washington County submarkets, as in recent years the area has emerged as the tech hub of the Pacific Northwest, as well as expanded its presence as a sports apparel capital.

We expect well-positioned multifamily assets in continuously growing locations like Washington County to thrive, but as opportunities become scarce and competition high, it is also critical to keep an eye on newer emerging markets.

In the West, we are seeing that certain submarkets of Salt Lake City and Denver are demonstrating similar fundamentals that the Portland area has for the last several years.

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