$2.2 mil Triplex?

[Zachary Critchett]

How does an investor make a $2.2 million Triplex a smart investment? 

I live in Bend Oregon which is a really strong market right now, but I am very interested to know how someone can turn that kind of money into a smart move? By that I mean how/why would someone who could afford to rent one of those units not just buy something? Is there more to it? Thanks in advance!

- Zac

[David Faulkner]

If you buy it for $1.2M and force appreciate it into a $2.2M triplex, cash flowing, with class A tenants, and high market appreciation and rent growth, it'd be a good investment. That's what many dudes out in SF do. Buying at retail for $2.2M, maybe not such a high return investment ... folks who do this are typically focused more on a safe place to park their money, often moving it out of a not-so-safe place in their home country and buying all cash. This would be more of a wealth preservation play and they would care less about ROI. Either that or using it to launder not-so-clean money coming in from questionable sources. There are all kinds of different scenarios where this sort of thing could make sense ... I think you are doing a smart thing by trying to understand it before jumping to a conclusion that those doing it are idiots ... you don't normally accumulate that amount of capital by being an idiot :).

As to why somebody who could afford to rent one of those units wouldn't just buy a place ... not everyone wants to own RE. Maybe they are a super busy high net worth business person who needs a nice place to stay or house their mistress while they are in town to close deals. Or maybe they are a skilled internet entrepreneur and can therefore make a much higher return putting a down payment into their own business. Again, lots of valid reasons are possible ...

One thing I've learned in REI is to be careful to not project my values onto others but instead try to see and understand things from their point of view. That way, not only do I learn a lot, but I'm also better able to identify different markets and tailor my product to my customer's (tenant's, buyer's, etc.) needs.