Multi Family Investing in "A" Markets?

12 Replies

My wife and I have finally decided that as responsible parents we need to find a market that is more conducive to raising a family (city is slowly losing its appeal). After seemingly endless discussions with @Jonathan Cope about investing, I am going to heed his guidance and only purchase quality assets. We have decided to move to Fairfield, CT which has high quality schools, tolerable property taxes and a decent barrier to entry.

There is sufficient single family inventory on the market currently, and I'm fully confident that we would find a fit eventually. However, I'd be remiss if I didn't explore the option of purchasing a multi family and minimizing monthly expenses.

Margins will undoubtedly be rather tight, these properties tend to trade at a bit of a premium, so thinking more longer term return.

I'd be curious to hear feedback on multi family investing in "A" markets, specifically where the majority of the inventory is single family. How are returns? Glaring downsides?

Thanks all

@Christopher Doyle , my wife and I went through the same process when we left NYC a few months ago.

We initially looked into multi-families. The challenges we found were that:

  1. Even in a great town like Greenwich (Fairfield in your case) the multifamilies are in neighborhoods that were not desirable, at least not now that we have kids.
  2. Multifamilies are expensive in an expensive town. We looked at a duplex that was over $850k. The compromise wasn't worth it. Even with $2500 in rent from the other unit.
  3. Don't expect cashflow. The more expensive RE means cashflow is very difficult to attain. 

That being said, we found a great coop and haven't looked back. Feel free to reach out with any other questions.

@Christopher Doyle

Truth be told being "tight" will definitely be your scenario and personally I do not want to tread water while investing.  This is why as a New Yorker, I decided to invest out of state and I have not looked back.  The numbers made a lot more sense and we were able to continue growth as a result.  Here in New York by me, I would need substantial money and there would be no way to continue growth past a certain point because these "A" neighborhoods require serious funds for growth (unless you get in the flipping business).

This is my personal two cents.  Hope it helps!

Originally posted by @David Faulkner :

Look into the hot new trend that is sweeping the nation, luxury house hacking ... right @Ben Leybovich? :)

 That's right baby. Wohoooo Luxury House Hacking!

This is where I am heading in Norcal. Multis in my town are almost the only areas where you get out of the SFR premium. Once you get into 4+ units you start getting lower $ per door. and if you go into a B area, you reallly crater. If you want to house hack and do multi, look for a property with multi detached units. The # of doors drive off the sfr lookers, but it still has a house vibe...

@Christopher Doyle I personally invest in Class A in a different part of the state (Northern CT), and feel that Class A offers the best chance to minimize potential issues that come with lower class properties. I am a huge advocate of sacrificing (some) cash flow for a property that doesn't provide me with any headaches. With that said, as you already know, you will pay for it. My suggestion is this: Link in with a good real estate agent in the area, who has the ability to scour the MLS for you, while also keeping their ear to the ground with potential for off-market deals. Off market deals in Class A always offer a huge benefit. I have an agent who covers this part of the state if you would like help. Feel free to PM me and I would be happy to share our experience with you.

Appreciate the candor. Key takeaway is that it seems as though there isn't much in the way of spread between SFR and Multi returns in quality neighborhoods unless you're getting an off market deal at a discount.

Unless of course you find a house with a casita...do those exist outside of the Southwest @Ben Leybovich ?

@Christopher Doyle Fairfield is a great call for multi families.    Property in this town has been holding strong for a while and will continue to for the reasons you mentioned.  There aren't many available because they go quick. Last I checked only 6 on the market.  My wife and I recently just missed a bid on a duplex by a hair.  Feel free to shoot me a message and let me see if I can help you out.

Originally posted by @Christopher Doyle :

Appreciate the candor. Key takeaway is that it seems as though there isn't much in the way of spread between SFR and Multi returns in quality neighborhoods unless you're getting an off market deal at a discount.

Unless of course you find a house with a casita...do those exist outside of the Southwest Ben Leybovich ?

 They do exists - called mother in law suit. And, multiple dwellings on one lot exist as well. And raw land which can be subdivided exists. Where there is a will, there is a way :)

Originally posted by @Ben Leybovich :
Originally posted by @Christopher Doyle:

Appreciate the candor. Key takeaway is that it seems as though there isn't much in the way of spread between SFR and Multi returns in quality neighborhoods unless you're getting an off market deal at a discount.

Unless of course you find a house with a casita...do those exist outside of the Southwest Ben Leybovich ?

 They do exists - called mother in law suit. And, multiple dwellings on one lot exist as well. And raw land which can be subdivided exists. Where there is a will, there is a way :)

 Only Russians from Ohio call them a mother in law suit ... everyone else in the Southwest calls them a "casita" ... hahaha!

Originally posted by @David Faulkner :
Originally posted by @Ben Leybovich:
Originally posted by @Christopher Doyle:

Appreciate the candor. Key takeaway is that it seems as though there isn't much in the way of spread between SFR and Multi returns in quality neighborhoods unless you're getting an off market deal at a discount.

Unless of course you find a house with a casita...do those exist outside of the Southwest Ben Leybovich ?

 They do exists - called mother in law suit. And, multiple dwellings on one lot exist as well. And raw land which can be subdivided exists. Where there is a will, there is a way :)

 Only Russians call them a mother in law suit ... everyone else in the Southwest calls them a "casita" ... hahaha!

 hahaha As I mentioned in the book, I call it my Cha-Ching suite :)