Buying rental properties in a flat or down market

9 Replies

Looking for some advice on buying my next property.

I live in Connecticut where property prices are flat at best, and probably declining a bit. I cannot really see myself trying to manage an out of state property, so stuck with Connecticut houses if going to invest. So should someone buy a cash flow yielding property in a market that is flat or declining?

A typical example is a $330K Duplex, with combined $3000/month rent. $8K for property tax and $1K for insurance. Total P&I plus taxes and insurance is $1800/month. So the cash flow is good. But is it worth it if you don't believe the property will retain its value?

Also, as far as exiting the property someday, Connecticut charges a 1% conveyance fee when selling the property.

Depends on how long you plan on holding it, how much you think it will depreciate, and if you think the depreciation is only a temporary thing, or is it going to continue. Lots of factors you have to take into consideration.

Hey Terry.

I am from Connecticut as well. Southington to be exact, which is not far from Ellington.

You are right in that the market in Hartford County and surrounding is flat at best. A duplex for 330k in the area is a little steep, is it a brand new duplex in a very pricey area?

I only say that because there are definitely cash flowing deals around the area that my clients and myself have scooped up in the last couple of years. No duplexes even close to that price range though.

There are still deals out there to multi family wise especially if you have the ability to purchase one that needs a little bit of work.

Always great to see another active CT investor on here!

Welcome @Terry Fox ! Where in Connecticut are you looking at those properties? To me the GRM/~1% rule seems a little on the low side (even in CT), but then again it depends on the area and your tenant base.

Best of luck in your search, and feel free to PM me if I can help.

@Benjamin Timmins

At least 10 year time frame.

How much it will depreciate and for how long? Better men then me get paid to figure it out. As long as our current political environment in CT exists, I don't see a lot of catalysts to turn it around.

@Michael Noto

The duplex is old, but remodeled. I will visit it soon to get a better idea if it looks as good as the pics, and it is in a pricier area. Not West Hartford, but I would consider it similar. This was just an example. There are some other duplexes around of various price and quaility.

So back to my original question (which is a tough one :-), what level of cash flow is "worth it", in a market with dim hopes of any real capital appreciation. If you are a long term investor (10 years or more), do you just expect over time, that at the least inflation will drive the cost of the home higher? I mean, even with the economic problems in CT, I don't think anyone expects it to "Go Detroit". Yes, I would love to invest in a state with a growing economy and better prospects for price appreciation, but we are staying in CT for probably 10 more years.

@Terry Fox I'll look at this two ways as someone who works with investors & who is an investor:

As an investor: There are plenty of deals multi family wise in the Hartford County area (non war zones of course) that you can buy at a good price that will cashflow. So for me they are combo plays if you will, I know I will be getting the cash flow monthly and I am getting them at a good enough price where I will be able to get some appreciation dollars upon selling, whenever that is.

Advice to my clients: I tend not to advocate investing strictly based on appreciation (even in a desirable place like west hartford). If you buy in decent to good areas, and can get a good deal doing so purchase price wise why not invest for the cash flow and any appreciation on the back end is gravy.

In the end though, with my clients I only give them my opinion when they ask, everyone's vision and goals are different, those are just my opinions on the Hartford County market.

When it comes down to it appreciation plays are too risky IMO especially a 10 year one.

Also @Terry Fox I look for cash flow at minimum at $200 per door. Very achievable in this area if you buy right and especially if you do not mind fixing multi's that have some deferred maintenance.

You can find multi's that cashflow $200 per door that do not need a ton of work though.

Don't forget, more people are moving out of the State of Ct., then are moving in. That has been going on for the last 10+ years, and I don't see it changing any time soon.

Raymond

@Terry Fox ,

Welcome to the Best Real Estate Site on the Net.

It is always nice to see another Ct., resident in the forums.

Click on the "learn tab" at the top of this page, and you could be spending many hours on

the Information that is available.

Raymond

@Raymond B.

Oh, I know. We will move when the job and family situation is right, strictly due to the tax and cost of living situation in CT. However, I expect us to be here for another 10 years or so. So if I want to invest in Real Estate, I need to learn how to make the best of this environment.

In a weird way, I think the bad economy helps the rental environment (more renters) as it is tougher for people to buy their own house. Or if they want to get out of CT, they also will not necessarily buy a house. They will rent.

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