Well I guess the time has come to dive in and start writing my first post. I've been reading with a lot of interest the amazing information that you have contributed to this site. What a fantastic community this is.
I live in Halifax, Nova Scotia and my wife and I have been looking at buying our first income property for about a year now. We have fallen victim to analysis paralysis. It's a combination of not being entirely sure what we should buy and thinking the next best opportunity is around the corner.
In order to help us through the process, I was hoping, though this first post, to ask a question. Would you consider buying a multi-unit property in a smaller community, with positive cash flow from the start, even if you knew that your property would likely not increase in value over time (or very little)?
I'm probably not giving you enough information to make an informed response, but I'm curious to find out what you think.
And thank you so much for making BP a wonderful business community.
Welcome @Stephan Richard . In your post you asked the question, "Would you consider buying a multi-unit property in a smaller community, with positive cash flow from the start, even if you knew that your property would likely not increase in value over time (or very little)?"
Just curious why you feel the property will not increase in value over time. Is it an area that is in economic decline? Are the major employers leaving town, environmental issues, etc?
I typically like to buy in areas where the macro-economic indicators are trending positive. Growing communities, jobs are coming into town vs going out of town. I like to buy in in individual neighborhoods within these towns that are staying steady or heading upward. Then I like to find a property in these positive areas and buy it at a price that will allow me to have positive cash flow. (Find a property with a motivated seller that needs fixing up that can allow you to have a property well under market value.) That way you get positive cash flow and as a bonus have a greater likelihood of appreciation in the property.
I invest in an area were property prices stable but they don't go up very fast. As a buy and hold investor, my focus is on the monthly income and not so much on short term appreciation. Over the long term (10+ years) I'm likely to get some appreciation on my property but not in less than that.
A benefit of areas where there is faster appreciation is that you may be able to build equity in the property over time and be able to take that equity out to put into a second property and a third and so on. Whether that is a strategy that your heart and head can be comfortable with is a question only you can answer.
Welcome to BiggerPockets, Stephan! I would recommend doing research on the market you'd want to do your deal in. That way you will have the appropriate contextual information to work with, for example, being able to verify whether that multi-unit property is truly not likely to appreciate in value over time.
I invest in a city with steady appreciation, nothing crazy, but it doesn't dive that much in a crash. More important to me is CASH FLOW - I want 12%+ cap rates and no maintenance on my houses, and I generally get that. I buy 50-60k houses cash or with cheap opm and owner finance.
Thanks everyone!! Wow I didn't anticipate this many responses so quickly.
The area in question is actually pretty stable with long established mid-sized employers. It's an ageing population, but it boasts a community college along with a university campus. There's nothing to indicate any major economic or demographic shifts in that particular area for the foreseeable future.
Properties are generally very old (60-100 years), but many have been renovated over time. My concern over long term appreciation is really based on sales history in the area. In fact, the properties we're considering have almost all been on the market for more than a year and asking price has gone down. In some cases, the value has dropped 10% over 4-5 years. Maybe It's just a buyers' market and I'm over thinking it.
Your replies have really helped. Thanks again for the warm welcome and I look forward to updating you on our progress.
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