Interest in multifamily deals remains solid and the number of buyers actively looking to acquire Dallas-Fort Worth properties today increases monthly. Indeed, many new buyers are entering our market as they recognize the strength and versatility of our local economy.
The darling of the multifamily sector remains the value-add property. Demand for value-add product is truly amazing as the opportunity to gain incremental revenue from operational and physical value-add is ever-present. Our office recently completed marketing three value-add deals in the northern suburbs with the average number of tours conducted on each at an impressive 55. This level of interest is at an all-time high and we are seeing potential buyers willing to offer significant non-refundable earnest money day one just to secure the deal.
A remarkable trend we are seeing is the emergence of buying groups in which several smaller investors pool their resources to make a bigger impact on the market. Many of the investors are using IRA and retirement funds. Five years ago, these groups were pooling their equity to buy $3 or $5 million deals, whereas it is not unusual today to see them closing on properties in the $40 million range. Part of the reason is that many of these groups had made significant profits on deals that they were recently able to sell. Several buyer groups are having success raising equity via crowd funding, and we are seeing younger players entering the market. It is not uncommon for new buyer groups to be headed up by people in their late 20s and early 30s.
Product in the Class B and Class C categories are also continuing to hit high water marks. We have recently witnessed some well-located Class B deals trade in the $150,000 per door range. The biggest challenge is the lack of available product to satisfy the demand of so many voracious investor appetites. The wild card of the multifamily sector is the high rise market and how well it continues to perform. Other trends we are seeing include more international buyers continuing to come into the DFW market as they see our economic strength. As long as the DFW market maintains its pace of 90,000 or 100,000 jobs per year, I predict that the Dallas-Fort Worth market will continue to produce a healthy climate for the multifamily sector.
Brian O’Boyle Sr. is vice chairman of ARA, a Newmark Company. Contact him at [email protected].
