Multi family development research / indicators to look for in a build and hold scenario
I am in the trades.  I have a construction company and investor looking to build low to middle end apartments in (hopefully) developing areas (SE Michigan, specifically) What are some of the indicators you look for to find which area is growing and/or in need of units. TIA
[{"id": "iaber9e", "text": "Job growth, limited vacancy, limited pipeline, good schools.", "replies": [{"id": "iagt78n", "text": "Job growth for sure, and I would elaborate that you need to see job growth in economic base industries because those are the ones that drive further population growth. EB growth can slow and you'll still technically have job growth and population growth for a bit because ancillary industries need to catch up to the needs of the growth. For instance, 1,000 more people working as tech engineers move in. They all need barbers and mechanics and nurses, but those industries in themselves don't drive population growth. \n\nYou may even be able to see future indicators of lower occupancy rates by seeing that EB growth has slowed or has gone negative, even if general job growth or population growth remains strong.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iabvv0q", "text": "There are usually market studies that give you the information you want. Verify everything in there and get close with city councilmen and women of the area. Nothing beats local experience. We are currently building in a pretty rural part of the country because we know a new Amazon facility and a few other heavy hitters are building infrastructure and warehouses in the area. I got all of this information from the city council and a local construction company. This coupled with a good market study that points toward demand and population growth is a pretty reasonable assumption. That being said, we are entering an acquisition market, not really a builders market. At least not for a few more quarters until the price drops on everything, but by that point debt will be expensive and people will be trying to un leverage themselves which is when most developers will be busy underwriting acquistions unless they are large enough to develop and acquire. For example, we\u2019ve had three or four national firms approach us about buying properties almost at 50% what they paid for them. This is just the beginning.", "replies": [{"id": "iadmx94", "text": "Which markets were those firms unloading in?", "replies": [{"id": "iagqt8s", "text": "Overvalued markets. Mainly Utah, Texas, submarkets of california and other metro areas. Basically look for anywhere that has had an extreme amount of development. I work out of Salt lake so I I\u2019ll use them. There is multi family everywhere now, and I mean everywhere, in between freeway on and off ramps, the middle of down town, and there is almost no growth in job centers.", "replies": [], "depth": 3}], "depth": 2}, {"id": "iadqza9", "text": "Thanks. Why would these firms unload like this? Do you see downside in apartment development besides the higher cost to build?", "replies": [{"id": "iaiewey", "text": "It takes a well oiled machine to own and operate tens of thousands of apartment units. First and foremost, bigger firms care about profit, after that they care about minimizing risk. Medium  sized development offices still have enough personal experience to decide case by case and market by market. Larger firms see a national dip and start offloading their assets. Multi family will always be king. But record low interest rates have made everyone look like geniuses the last few years, people don\u2019t know they\u2019re over leveraged until they having to write three million dollar checks just to close on some properties. Not everyone has that three million. Enter me and my group. We are capitalized and understand recessions because we went through 2008. Recessions is when real wealth is made.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iac6s0g", "text": "There are many properties in our backyard MI Oakland county that is building apartments for seniors. That is your indicator. Small one bed units are in need. \n\nI would also make it to the register of deeds and also see what can be scoped there. That is my favorite place to find deals. Let me know if you need help.", "replies": [], "depth": 1}, {"id": "iadr8p8", "text": "Thanks neighbor! What should I look for in the register of deeds?", "replies": [], "depth": 1}, {"id": "iadw3tz", "text": "Demand drivers are the same anywhere with regards to access to employment nodes, population growth, etc. On an asset level, if you\u2019re building to a middle-income demographic and product, it\u2019s critical to make sure your profit may rents as the low-cost provider compared to similar assets are proven out in the market now. In addition, you should be penciling an untrended  return on cost at least ~150bps above stabilized market cap rates as acceptable returns due to the risk premium for building ground up", "replies": [], "depth": 1}]