It’s 2011 and Edmonton’s still a funny market when it comes to multi-family investment inventory. There’s only 58,557 purpose built rental units in Edmonton according to CMHC (page 2, PDF) and that number is shrinking. That’s 58,000 units for just over a million people compared to almost a half million units for Montreal’s 3.6 million. That’s more than double the number of apartment units per person.
The fact remains that it’s very tough to buy an apartment building in Edmonton. Advertised CAP rates as low as 4.5% are not unheard of, and 5.5-6% are more reasonable. The vast majority of inventory sells privately, without ever touching the commercial MLS. The question is, how are you supposed to find and buy these buildings? Here’s some tips from my experience working with the owners, managers and purchasers of multi-family buildings.
- Don’t be a Jackass. You might be a successful investor. You may have even earned a bit of that ego you’re carrying around. However the owners of apartment buildings have the gold and make the rules. The majority of sellers I know (at least those who didn’t buy conversion-crazed prices at the peak) don’t need to sell and aren’t interested in being pushed around by you.
- Networking Works. There are few owners around and most of them know each other. Getting out in the community and meeting some of the owners, managers and agents who deal with these types of properties is important. You need to build a relationship to give them a reason other than a bunch of numbers why they should sell to you.
- Solid Finances. I’ve got a list of 50 people who want to buy small multi-family buildings. How do you get to be a the top of that list? By being the best able to close the deal. That means cash, solid teams and the ability to pull the trigger quickly.
Multi-family is a different kettle of fish compared to residential investments. Get used to the fact that in Edmonton it’s a sellers market, and you might have to learn to play by the vendor’s rules.
NB – First published on ChrisDavies.ca on June 21, 2011