Buying apartment buildings is pretty simple.
And the value add process is even more simple.
It comes down to the prices you can buy for buildings.
And how much it can rent for once you renovated the units.
The more there's a spread, the difference is your profit.
Since the last great recession, both prices and rents have been rising.
And as long as the rents have grown past the prices for buildings, it allows you to be profitable.
But like any opportunity, the window always closes.
Pretty rapidly, buyers saw the opportunity to buy buildings which pushed prices high enough—which shut off buying opportunities.
The peak of the market is when the buyer demand for apartment buildings— is stronger than the cashflows it can generate.
It's starting to look like that day has arrived.
So buyers, caution ahead!