The trend is mostly noticeably among smaller purchases, primarily because Fannie Mae and Freddie Mac do not support financing for projects that require stabilization. Such deals are either financed in cash or by local banks, says Ari Firoozabadi Group of Marcus & Millichap Real Estate Investment Services.

Firoozabadi, who focuses on small multifamily, is seeing more and more value-add transactions close, he tells GlobeSt.com. The latest was the sale of 4004-4012 Biddison Ln. here, a 30-unit failed conversion that sold for a miniscule $810,000.

A Bethesda-based partnership acquired the property in 2004 planning to take it condo. It was gutted to studs, but when the bottom dropped out of the condo market in 2006, the partnership declined to finish the project. It was just sold to a Baltimore-based development group, which intends to renovate the units and return the property to rental condition. The group will be investing $25,000 per unit or $700,000.

While there are more potential buyers in the market interested in value-add multifamily opportunities compared to a few months--there is still a limit to what the market will support, Steve Schwat, principal of Urban Investment Partners, tells GlobeSt.com.

What buyers want, he says, are properties that are basically income producing, cash flowing opportunities available at a six and a half or seven cap--and then, once value is added, the cap rises to an 8. "There are not a lot of people willing to wait a year or two for cash flow to begin," he says.

UIP's latest project falls in that sweet spot, he adds. The company has just completed a $2.1 million renovation of The Macklin, a 70-year-old apartment building located at 2911 Newark St., NW, in the District. Residents will begin moving into their newly upgraded apartments on Dec. 1.

Urban Investment Partners acquired The Macklin plus an adjacent 5,300-square-foot retail building that houses Ireland's Four Green Fields bar and restaurant, a parking lot, and an empty lot in mid-2008 for $9.5 million. Along with four 1,500-square-foot retail bays on The Macklin's ground level, the property has a total of 11,300 square feet of retail space with entrances at 3400-3412 Connecticut Ave., and parking for 15 cars.