Multifamily Rent Growth and Houston

I’ve recently come across a light value add deal that I could personally invest in. It’s a friends & family capital raise, so there is not a data room with mountains of information that many of us are used to seeing.

They’re acquiring at $107k per door and rents for one bedrooms are $975. I have some multi experience but it’s been in other markets so I want to make sure I’m not missing something glaring with respect to Houston.

With multifamily in general, when are you guys forecasting rent increases in class B / C apartments? I’m aware that many believe collections will drop when stimulus dries up, but when is it appropriate to include rent increases in your model? This team is forecasting lower occupancy / collections up until august where it begins to slowly turn around. Seems a bit aggressive to me but would love to hear from people with more experience in Multi / Houston.

 
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We've been absolutely crushed w/ rent growth in our Houston portfolio. Inside the loop is the worst (negative rent growth when you account for concessions), but still only seeing 1-2% annual rent inflation elsewhere. Be carefull...the rents you are quoting seem low enough to at least get an extra 25 bucks each renewal, but I'd still run sensitivities on lower growth. Class C tenants in Houston are the type of people that will literally unplug their TVs and move to the property next door over a $50 increase.

It's funny bc Houston is literally proof that housing affordability is a supply problem. You have West Coast markets pushing for rent control to manage their housing crisis...the answer is allowing more supply!

 

We were underwriting roughly 5% rent increases per year on value-add deals, pre-COVID. Now, I’m not so sure we would be comfortable underwriting any rent growth in the B/C space anywhere for at least the remainder of 2020 and all of 2021.

 

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