Expensive Market Place - What To Do

4 Replies

I am facing a dilemma and I'm sure others are facing this issue too. The issue is multi families are getting very expensive because vacancies are so low and the market is red hot for multi family properties.

I want to buy a fourplex or triplex in my area of Bellingham, Washington. I'm going to live in one of the units and rent the other units out because I'm using a VA loan, so I get to take advantage of zero down.

The problem is that I'm in an expensive marketplace. I have ran the numbers every direction and most every property in the area violates the rules on this site (50% rule, etc) The cap rates are low 6s and the gross multipliers are well north of 10.

So what to do is the issue. Do I just wait on the sidelines because the prices are too high or do I jump in and take advantage of the low interest rates? I am not going to buy in another city because I want to live in the place.

Any thoughts??

Dan Heverling

Every one of the metrics you've given support that investors think the locations are more profitable than most areas.  Location, location, location.  The only caveat i'd give is do you think this is the top of your market cycle?  

@Bob Bowling

Bob,

Thank you for the response. So if I understand you right you are saying that it really does not matter as much about the metrics in Bellingham because prices are high in general because people really want to live here?? And the more important issue is whether a top is in and prices might start going down. I think that prices will go down during the fall and winter, but then prices will keep going up because vacancies are expected to stay low for the next couple of years since the younger generation tends to want to rent versus buy...

Dan

Exactly, Daniel.  Use your common sense.  What good is a place where investors only pay 50 times rent and it never changes ( rent or value)?  Now say in your market Investors pay 100 times rent but the value doubles in 10-12 years and rents stay 1% of that.  Daniel, do the math.  Keep this between us tho.  The turnkey people don't want this information out.

@Bob Bowling

Bob,

I appreciate the information and you have some excellent thoughts. Have fun down in Hawaii :) 

Dan

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