Should I invest in mult-family?

Question

I have owned (2) single family residence and (1) commercial building for several years. The commercial property is paid off and the SFRs have low mortgage balances.

I have positive income on all the units. I’m have been considering selling all three and investing in multi-units (5-20) units, using 1031 exchange. However, I’m not too familiars with multi family property. Is it a good move? Thanks in advance for your input!

Matthew Ryan · Answer

@Matthew Irish-Jones - This will be a well-debated topic in the weeks/months to come I'm sure. Given the looser timeframes, I would agree. But if you consider the area restrictions and the needed sophistication of the investor it may be considered less ideal for some. I've already seen a host of people on here saying "I've got a deal in an OZ how do I qualify!?!" For passive investors, OZ's will be great IMO. Active, smaller investors it presents a lot of challenges and I believe few will do well (or experience a lot of pain getting there).

Dave Foster · Answer

@Roberto Moita, The 1031 exchange is made for exactly what you're contemplating - a consolidation of several diverse properties into one larger asset.  There can be many advantages to this - more units producing revenue but in a smaller space for easier management, financing, logistics, yield curve ... etc.

Whether the MF space is right for you is another matter.  But no matter what sector you want to go into - as long as it is investment real estate you will be able to use the 1031 to get there tax deferred.

Matthew Ryan · Answer

@Roberto Moita - I'll second @Dave Foster and @Matthew Irish-Jones - 1031 or Opportunity Zones are the way to go for that type of gain. Yes California is expensive there are alternatives to being an active investor; you could invest with fellow syndicators who may be specializing in an asset class that has the return profile you're seeking and a solid track record of doing so. That all depends on whether you're looking to invest actively or passively.

Matthew Irish-Jones · Answer

@Roberto Moita you can reinvest in opportunity zones.  They seem to be a better option than a 1031 exchange currently.

Matthew Irish-Jones · Answer

@Matthew Ryan yeah I agree with you there.  I don’t think most smaller investors are going to take advantage of this.

Matthew Irish-Jones · Answer

@Matthew Ryan and @Roberto Moita as far as I can tell, still some deciphering needed with the federal law, Opportunity zones are superior to 1031 Exchanges if you plan to hold the asset for 10 years or more.

Jo-Ann Lapin · Answer

A loaded question for sure . What areas and type of property are looming at b,c class a value add situation ?

Roberto Moita · Answer

Thanks for the information! I’m looking into converting all my assets into multi-family. In California, I will not be able to purchase much, however, if I take my money out of state I will have better buying power. The question is; which state?

Should I invest in mult-family?

Most Popular Reply