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Discovering the 22.8% IRR Potential in The Montage at Lee’s Summit

With a target net internal rate of return (IRR) of 22.8%, the Lee’s Summit Development in Missouri, a build-for-rent, master-planned community of townhomes and villas, has caught the eye of investors. But is this projected return for real? Let’s look into the factors that make this MultiFamily Lee Summit development’s success possible.

Offering Overview:

  • 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: A Community with Room to Grow

Located within the Kansas City Metropolitan Statistical Area, The Montage at Lee’s Summit is a 226-unit community that offers miles of trails, water features, shaded gathering spaces, firepits, pickleball courts, a dog park, clubhouse, fitness facility, and a resort-style pool. The area’s attractive features include a growing population, rising employment rates, low unemployment, increasing average household income, growing rents, and a low vacancy rate.

Location: A Great Suburban Life

Lee’s Summit, one of 17 suburbs in the Kansas City MSA, is 16 miles southeast of Kansas City and is the 6th largest city in Missouri. It provides a great suburban life, drawing families with its good schools, parks, and community amenities.

Population: Fast Growth in Lee’s Summit

Lee’s Summit has seen big growth over the past decades, with its population going from 8,267 in 1960 to an estimated 104,638 today. The Kansas City/Lee’s Summit population is expected to grow by over 30% by 2040, adding as many as 38,000 new residents.

Employment: A Solid Job Market

Employment in the Kansas City MSA grew by 2.3% in the fourth quarter of 2023, resulting in a gain of about 25,000 jobs. Big employers in the area include HCA Midwest Health System, University of Kansas Hospital, Saint Luke’s Health System, Ford Motor Company, T-Mobile, and Cerner, which was bought by Oracle.

Income: Higher Than State and National Averages

According to Census data, the median household income in Lee’s Summit is about $89,140, which is about 20% higher than the Kansas City MSA and 1.4 times higher than the state average.

Rent Growth: Strong Need for Rental Properties

Over the last 12 months, asking rents in Lee’s Summit went up by about 5% to around $1,288 per month, going past the MSA average of $1,172 per month. REIS predicts asking rents to go up by about 3.9% per year through 2024 and 2025, reaching an average of $1,471 per unit per month.

Vacancy Rate: A Tight Rental Market

As of July 2023, the vacancy rate in Lee’s Summit was about 6.2%, which is 2.9% higher than its long-term average and 1% higher than the Kansas City MSA average. However, REIS expects long-run vacancy to go down to about 5.7% by 2024 and 4.7% by 2025.

Can The Montage at Lee’s Summit Really Hit a 22.8% IRR?

While a 22.8% IRR might seem too good to be true at first, the info we have shows that The Montage at Lee’s Summit could very well reach an IRR of over 20%. Things like a growing population, strong job market, and increasing need for rental properties make this MultiFamily Lee Summit development a promising investment chance.