This Multifamily Development Offering Is Targeting A 22.8% IRR – Are These Returns Realistic?

EquityMultiple has an active listing for Lee’s Summit Development, a build-for-rent, master-planned community of townhomes and villas in Lee’s Summit, Missouri. The community will be named The Montage at Lee’s Summit, and EquityMultiple has a head-turning target net internal rate of return (IRR) of 22.8%. Is this realistic? Let’s dig in.

Offering Snapshot:

Property Type: Townhomes
Investment Type: Equity
Target Closing: January
Target Hold Period: 36 Months
Minimum Investment: $15,000
Projected Returns:

IRR: 22.8%
Multiple: 2.0x
Cash-on-Cash (average): 7.6%

Hypothetical Return on $100,000 investment:

Year 0: ($100,000)
Year 1: $0
Year 2: $0
Year 3: $19,096
Year 4: $180,691 (anticipated exit)

The Montage at Lee’s Summit

The Montage at Lee’s Summit will be a 226-unit community with “miles of trails, water features, shaded gathering spaces, firepits, pickleball courts, a dog park, clubhouse, fitness facility, and a resort-style pool,” according to the Investor Packet. Lee’s Summit features all the top attributes we look for in a real estate market – a great location, a growing population, rising employment with low unemployment, rising average household income, growing rents, and a low vacancy rate.

Don’t Miss:

Investing in real estate just got a whole lot simpler. This Dara Khosrowshahi-backed startup will allow you to become a landlord in just 10 minutes, and you only need $100.
Commercial real estate has historically outperformed the stock market, but few investors have the capital or resources needed to invest in this asset class. A platform backed by industry giant Marcus & Millichap is changing that, allowing individuals to invest in commercial real estate with as little as $5,000.

Location

Lee’s Summit is one of 17 suburbs in the Kansas City Metropolitan Statistical Area (MSA), located 16 miles southeast of Kansas City. Lee’s Summit is the 6th largest city in Missouri and offers a desirable suburban lifestyle with good schools, parks, and community amenities, which has continued to attract families.

Population

Lee’s Summit has been one of the fastest-growing suburbs in Missouri over the past decades. In 1960, its population was just 8,267 compared with an estimated 104,638 today.

The Kansas City/Lee’s Summit population is projected to grow by over 30% by 2040,…