Bought a triplex for $275K in 2018. A buyer today loses $1,200/mo on the same bldg

[Anthony Gayle]

I ran my own building through today's numbers last week, and I wouldn't be able to buy it.

Bridgeport, CT, 2018. $275,000, VA loan, $0 down, about $15,850 out of pocket after paint and appliances. I moved into one unit and rented the other two. For anyone outside the Northeast, Bridgeport sits on the commuter rail into Manhattan, about 20 minutes past Stamford, which is the expensive one.

Today it's worth around $705,000, and that's a conservative read off Zillow and current ARV in my neighborhood. Rents on those same two units are up about 60%. I still live here, and those two units cover everything and hand me about $1,815 a month.

Same building at today's price and today's rate, a buyer is roughly $1,200/mo negative going VA, about $600/mo negative at 20% down conventional. No equity. No free housing. Same building, same rents. The only thing that changed is when you got in.

Here's the part that bothers me. I bought it because I'd spent two years watching people get priced out of Stamford and land in Bridgeport, and that part I read right. The bonus was supposed to be a Metro-North station that was in planning at the time. It got deferred the year after I closed and never got built. What actually moved this market was COVID.

So I was right about the direction and completely wrong about the reason.

Which leaves me with a question I can't answer from here. Bridgeport was the affordable alternative. It isn't anymore. Is the next-city-over play still alive in your market, or have the cheap cities been priced out too?

And when you look back at your best deal, did it work for the reason you bought it, or did something else end up driving it?

[Ashish Acharya]

The house hack math shifting so dramatically has a real tax angle worth flagging alongside the market story. Since you moved into one unit and rented the other two, your depreciation basis has only ever applied to the two rented units, that split matters a lot now given how much the property's appreciated, since only that rental portion's basis and any depreciation you've taken factor into your future gain if you ever sell.

If you do sell at some point, the Section 121 exclusion only covers gain tied to the unit you've actually lived in, and only if you meet the 2-of-5-years test at the time of sale, the two rental units never qualify for that exclusion regardless of how long you've lived there, and depreciation recapture on those units applies on top of that at a flat 25% rate no matter your income bracket. With the building nearly tripling in value since 2018, that recapture and gain on the rental portion specifically could be a meaningful number, worth running that scenario now rather than being surprised by it whenever you do decide to sell or convert the whole property to a rental down the line.

Happy to connect!