Bob Fraser explains why older Class C apartments are undervalued. A 1970s building he bought had $7 million in CapEx already done and sold below the seller's basis. The catch: older properties need thorough inspection for roof, plumbing, and HVAC risks before you commit.
Oh, I think people always think the Class C, you get a picture of Class C as kind of this old dilapidated dated property. But I mean, we've got a 100-year-old property in the Plaza, right, that's been well maintained. It's huge demand. There's no construction around there. It's extremely kind of a hip spot, right? It's just an older property. And is that really always going to be this sucky property? Well, no, absolutely not. So I think selective Class Cs, if they're well maintained and well located, because the ABC designation is primarily an age designation. But to me, that age Hey, we know there's old people that matter, you know, and there's old buildings that matter, right? So, you know, I refuse to be ageist in my real estate selection.
Yeah. Well, I think it's going back to John's comment of being selectively opportunistic because I agree with you. I actually think there's going to be a very big opportunity in older assets because it's completely off the radar of any, you know, big tech right there. They're saying it has to be 2000s and newer.
And the prices are insanely low, right?
Yes.
Because they're out of demand.
But it does matter on the CapEx rate. Risk you're taking. You are taking a lot more risk of an older asset with, you know, the roofs and the plumbing and the HVAC systems, and a lot of times, you know, worse renter basis. So you have to scrutinize the rent rolls. You have to really know your renter base. Are they good tenants? You have to scrutinize the CapEx needs of the property over the whole period. But I actually think because there'll be a lot more opportunities there, you're gonna be able to be more selective about which ones you want to invest in. I mean, we just bought an asset a couple months ago that had $7 million of CapEx invested by the last seller, and we bought it below their basis. 3 years later, and everything's been replaced. Everything's done. It's a '70s vintage, but it looks way newer. Very strong renter base, very strong location with the good school district and a great submarket.
And it's cash flowing like crazy, right?
And that's something that you haven't seen in multifamily for a long time.
Do you know there's, there's no such thing as a bad property, really? It's just a bad price, right?
