Consider this deal, an 18-unit apartment complex on Wehrle Drive in Amherst just sold for $2.5 million, or nearly $139,000 per apartment, or 52 percent above the regional per-apartment average of $91,701 per door.
The complex, which went on the market earlier this fall, attracted nine bidders - a mix of local and out-of-town investment groups.
That deal serves as a snapshot of still strong interest among investment groups in snapping up local apartment complexes. Groups include non-local investors from New York City, California, Michigan, and North Carolina, according to some recent transactions.
What is the region’s secret sauce for attracting out-of-town investors when it comes to apartments and multi-family complexes?
Veteran real estate broker Chris Greco, president of Greco Real Estate explains:
“I believe that where these investors are coming from is a higher priced per-unit market,” Greco said, “They’re coming from where the average deal is a five-cap, and if they can come to Buffalo and get six, six and a half, or they can buy for a 100 to a 150 a door versus 170 to 225, they want their return.”
Generally speaking, investing in regional apartment complexes is a safe real estate bet. Average return rates run about 6 percent to 8 percent, with more than a few hitting the 10 percent return rate. That catches the eyes of the investment community. So does the trend of more people moving into apartments. The regional apartment complex vacancy rate is less than 5 percent.
Taken together, it makes for an attractive investment market.
“I think that from a lender standpoint, they feel more comfortable with it (multi-family units) because, versus office or retail where you have larger spaces that can become vacant, when apartment buildings have vacancies, there’s usually only a handful of them, and they’re smaller units that don’t affect the income too much. So, the risk factor of owning a multi-family is much less than a retail or an office building,” Greco said.
When it comes to apartment-anchored deals, expect to see more, not less, coming in both the short and long term.