After several years in which savvy apartments owners were more likely to sell than to buy, that dynamic appears likely to change. For APARTMENT FINANCE TODAY readers, the best opportunities in 2008 may be in Class C and to some extent Class B properties in secondary markets.

“Many investors have been frozen with fear of a changing market and have held off on making any big moves. Because of this, there is a ridiculous amount of money just waiting to be invested,” said Jerry Anderson, president of real estate brokerage Sperry Van Ness.

He said institutions and real estate investment trusts will be able to make solid purchases, since they will no longer have to compete with as many private investors “throwing money at properties in order to snatch them up quickly.”

The multifamily market will see increasing differentiation in value based on location and property quality in 2008. That means you may still find some good opportunities in Class B and Class C properties in smaller markets— if you are very careful.

With capitalization rates rising and expected to go higher this year, you may be able to find properties that are no longer overpriced compared to their potential for net operating income (NOI) growth. A cap rate, which is a property’s NOI divided by its purchase price and expressed as a percentage, is a measure of return on investment.

However, with lenders shunning risk, you will also have to tell a very persuasive story about how you will raise rents and increase net income.

Cap rates this year will rise between 50 and 75 basis points for Class B properties and 75 to 125 basis points for Class C properties, said Linwood Thompson, managing director of the multifamily housing group at Marcus & Millichap.