Multi-Family project 30+% average annual return?

Just saw this from one of the local multi-family investment group. Student housing development in Buffalo, NY:

Accredited investors: Join us in developing a stunning new 322-Unit Graduate Student Housing Project in Buffalo, NY, near the University at Buffalo. Over 30% average annual returns are projected, due to large environmental clean up credits and 13 years of Tax incentives. And there is realistic potential for returns to go even higher than projected.

Pitch deck:


Wow…Students must be rich in Buffalo. .Able to buy Starbucks coffee everyday. And live in a fancy apartment And give us a 30% return…No wonder student debts are so high…Big problem with student housing high management costs, vacancies

I bet their IRR has a lot of caveats

I like student housing, especially good in rent controlled cities like Berkeley. The constant turnover means you can charge market rent. But Buffalo and upstate NY in general is in secular decline I think. I’d rather buy closer to home say in Merced, or CSU campuses like Rohnert Park.

@myo are you going commercial?

Buffalo is low cost high cash flow area even with decline real estate. Whatever I know student housing returns are great and bufflalo will be doing great, esp to the initial investors, esp with 15% YOY returns. Only question is liquidity of 100k if we want to get out, which is not there or not easy. This is common to all private investments.

Second there is no mortgage leverage. This is purely good for those who does not have time to analyze investment, do not need the 100k (or whatever investment amount) for longer period of time, but to get 15% decent returns over a long period 30 or 40 years kind of annuity.

The Forbes guy whose articles I posted in the past said it’s better to invest in faculty housing instead of student’s. I don’t remember his logic now.

This is a 12-unti in Merced:

137 West 19th Street is a wonderful 12-unit apartment complex located three blocks from highly desirable Downtown Merced. Built in 1965, it is situated on a 15,001 square foot lot and has a gross livable area of 8,160 square feet. There are eight two-bedroom/one-bath units and four one-bedroom/one-bath units.

In recent years Merced County has been one of California’ s fastest growing regions. For the forseeable future the area is projected to have sustained population growth at a rate of over two percent annually, twice the state average. Additionally, the subject property is situated only five blocks from a planned stop on the California high-speed rail, which will run between Los Angeles and San Francisco. The resulting positive externalities are expected to be significant for the Merced and Central Valley economies.

Merced is growing in part because of the impact of U.C. Merced, which is expecting the student population to grow by 4,000 students by 2020. The university is only building housing for 50 percent of the new students and this increased demand is expected to spread throughout Merced, benefiting properties further from campus because there is low apartment inventory near the university.

Asking 850K, 6.9% cap rate. Merced benefits from two themes: an expanding UC campus and the coming HSR to Silicon Valley.

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Why invest in the middle of nowhere. Stick with the high demand metros!

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Would rather buy in Merced than Buffalo…I will sell a 8 unit at 8cap in Tahoe…$900k…Net $75/y


I am pretty bullish on Central Valley, at least the northern half:

  1. HSR to Silicon Valley and SF.
  2. Expensive housing in Bay Area will push people to the exurbs.
  3. Self-driving cars also push people far into exurbs.
  4. Retail in Bay Area will be replaced by warehouse and fulfillment centers in Central Valley

Merced has the additional benefit of an expanding UC campus. Highly educated faculty and researchers will push up the public school quality. It will become Davis 2.0.

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I am looking for cash flow primary investment as next than appreciation primary one. Primarily to add some diversification mix to my portfolio. Feel like multi-family / commercial might be good for that. Not sure on where though, maybe, I’ll stick to CA (maybe even with Elt’s help in Tahoe).

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Stick with the Sacramento MSA…the farther south you go the more risk

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