I have been investing in 2-4 unit properties for the last couple of years. In general, cashflow and cash-on-cash returns are my primary drivers. However, my purchases have been in areas with stronger than average appreciation. Right now I am considering a 16-unit property in a smaller market that has only seen 17% growth in value over the last 11 years. This property has great cashflow with some quick/easy value ads that should be able to push the cash on cash return up in the 25% range in the next 6-12 months while holding back 10% for vacancy, maintenance, and reserves. While I can pull in money hand over fist, my concern is that a 90 year old building in such a small area might be hard to get rid of in the future.
Having been fortunate to find cashflow and appreciation on my first 4 investments, I am curious how to best evaluate a likely one-sided opportunity here. Thoughts/recommendations?
Well what is your time horizon? Are you looking to get in, add value and then leave? If so then you're right, maybe not the best idea.
But if you're up for holding the property for 20-30 years, or forever, then it might be a good option.
Selling doesn't sound like it will come easy.
Thanks Antoine. In general, I'm a buy and hold guy. I don't see a need or desire to get out in the short term. Most likely 10 yrs to forever.
If your main investing goal is cash flow, and you intend to hold the property "10 years to forever", you shouldn't let a potential secondary benefit prevent you from purchasing.
Did you know your first properties were in an area experiencing appreciation or did you purchase them not knowing you'd see stronger than average appreciation? If you didn't know, and if the appreciation never happened, would you be happy with the performance of those properties today?
You mention this opportunity as one-sided, but I think you should really just consider it to be 100% in line with your stated investing goal.