I read a great article in a local real estate trade magazine (not available online) about investing in apartments.

The author Pete TeKampe of Marcus & Millichap says the number one mistake apartment owners make is not understanding the dynamics of their submarket.

Rent concessions and value policies tend to be based on inaccurate and incomplete information. For example, at the beginning of this year, the North Scottsdale/Fountain Hills submarket was dealing with the aftermath of losing 41 percent of its apartment units to condominium conversion. Area owners had a nebulous grasp on what drove their apartment market and consequently believed that condo conversions would result in unabated rent growth.

From the beginning of this year to mid-year, rents went down $4 and the percentage of area communities offering concessions tripled during the same time. Why? The majority of converted units were sold to unorganized and unsophisticated investors who dumped the units back on the market as rentals.

That forced nearby communities that were not converted to increase concessions and lower rents to remain competitive.

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