Scarcity of value add?
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[{"id": "fyqw7fr", "text": "It depends on your local market and it depends on your asset class. Where are you looking to invest? Are you looking into MF? Self storage? Mobile home parks? In my city multifamily cap rates are very compressed, and any \u201cvalue add\u201d property listing you are going to see already has the amount amount of value you can \u201cadd\u201d baked into the price. \u201cLook! the rents are 2.5k/mo, but market rent for 2brs this size is 3k\u201d. Yeah, but I would also have to spend $100k to renovate the units to get those market rents and your asking price is based off those market rents not the current rent roll. I think I read somewhere that in most major cities institutional investors own 93% of multifamily units.", "replies": [{"id": "fyrskck", "text": "When you say institutional investors, wold be more specific? Thank you", "replies": [{"id": "fys0qwn", "text": "wall street whales ... pensions, PE firms, investment banks, etc ... essentially large institutions that raise funds consisting of OPM vs investing their own", "replies": [], "depth": 3}], "depth": 2}, {"id": "fys0x85", "text": "&gt;any \u201cvalue add\u201d property listing you are going to see already has the amount amount of value you can \u201cadd\u201d baked into the price\n\nthis is pretty spot on... from what ive seen its not really a matter of no VA plays, its that any VA deal is marketed to a year 1 pro forma upside and for the past 3-4 years theres always been somebody who is dumb enough to get to those year 1 numbers", "replies": [], "depth": 2}], "depth": 1}, {"id": "fyrg0jf", "text": "Hi OP, I'm not in CRE, but in residential and something about your post stood out to me. I also learned about the scarcity mindset going into real estate, but to me, it is mainly about the idea that there are more than enough deals/customers/transactions out there for the agents that care to find them. Maybe this is what they meant by that?\n\n[https://www.inman.com/2015/04/02/8-tips-for-cultivating-a-mindset-of-abundance-in-real-estate/](https://www.inman.com/2015/04/02/8-tips-for-cultivating-a-mindset-of-abundance-in-real-estate/)", "replies": [], "depth": 1}, {"id": "fyrinhq", "text": "Two different things. What your friends are talking about is not to be selfish thinking that every deal they do means you get poorer. That is a scarcity mindset and makes it so you don\u2019t cooperate with anyone because they are competitors. \n\nWhat the article is talking about is deals. There is not this flood of value add deals because the market has not collapsed. \n\nSo two different things.", "replies": [], "depth": 1}, {"id": "fyrlv0c", "text": "There are plenty of value add deals - every property eventually needs significant capital investment and that\u2019s where VA comes in. That being said, yields on a lot of it have gotten compressed (although that\u2019s not necessarily a bad thing... if you buy at a 5 and you build to a 6.5 yield you make money on the margin). Anyways there are a ton of deals out there, you just need to find one you have conviction in - you have to kiss a lot of frogs to find a prince.", "replies": [], "depth": 1}, {"id": "fyrmqmp", "text": "This can be challenging starting out, when you build a pipeline and lose a deal after months/years of prospecting, contacts, conversations, etc.  A \"scarcity mindset\" as others mentioned can leave you overly focused on this loss rather than on the multitude of opportunities out there.  It is incredibly freeing when you don't get wrapped up in losing a piece of business.  Take a lesson from any loss, adjust if needed, keep working.  CRE is dynamic and has so many paths.  While I believe it's important to have a focus initially, you can build on this, learn from others and you will start to see a much wider world of opportunity.", "replies": [], "depth": 1}, {"id": "fyrninx", "text": "Good deals always find money and everything is for sale at the right price", "replies": [], "depth": 1}, {"id": "fyrs5fe", "text": "I would agree for the high end of the market. The $20M+ properties have all been gobbled up by institutional money, and they are starting to work their way through tertiary and lower markets as well.\n\nThe firm I worked for would buy in the $100M range and there was very little opportunity for value add in that space. Remodel a little, reduce opex, hold for 60-120 months and sell.", "replies": [], "depth": 1}]