The apartment properties that interest us are not always the ones with the best renderings or the most attention from institutional capital. At Draymoor Ventures, we spend time looking at existing Class C+ to B housing in durable Midwestern markets, where the acquisition basis may remain well below the cost of building comparable housing today. The point is not to buy inexpensive apartments for their own sake; it is to own useful housing at a price where existing cash flow can do most of the work.
Two listings illustrate the profile. Windmill Apartments outside Indianapolis is marketed at approximately $94,500 per unit, with a stated 7.95% cap rate, 100% occupancy, and more than $550,000 in capital improvements over the prior three years. Straight Street Apartments in Cincinnati is listed at approximately $75,900 per unit, with a stated 9.01% cap rate and 98% occupancy. Its marketing notes that the roofs were replaced in 2020. Straight Street’s online financial summary also repeats $99,999 in several fields, so its advertised yield needs particular scrutiny.
Those figures do not make either property a good investment. They give us a reason to investigate further, while remembering that all of them are listing claims that need to be checked against source documents.
Basis creates options
Price per unit is not a valuation by itself. A $70,000 apartment can be expensive if the building needs $40,000 per unit in deferred work, while a $140,000 apartment can be attractive if its location, rents, physical condition, and replacement cost support the price. Basis still matters: when comparable new housing would be difficult to deliver anywhere near the cost of an existing property, the investor owns something that may be hard to reproduce. That can provide a different kind of downside protection than a forecast of rent growth, provided people continue to want the housing.
Existing tenants matter more than theoretical tenants
We also look for evidence that people already want the product. Windmill is marketed at 100% occupancy and Straight Street at 98%. Those reported figures do not establish collections, tenant retention, or the durability of demand. They make the rent roll, leases, and collection history worth examining. For a long-term owner, demonstrated tenant demand can matter more than a theoretically superior building whose rents have not been proven in the market.
Cash flow should carry the investment
The central question is whether we would still be comfortable owning the property if rent growth disappoints. If the answer depends on appreciation, aggressive rent increases, or selling at a lower cap rate, the deal may not fit the Midwest strategy we are developing. Growth is welcome, but it should not be required. By “boring multifamily,” we mean housing people already use, bought at a basis we can explain, with cash flow that is there before the spreadsheet starts relying on heroic assumptions.
Source listings: Windmill Apartments; Straight Street Apartments. Listing figures are broker or seller marketing claims, not verified operating results.