Tukwila, WA · Member since 2019 · 70 posts · 88 votes
When is the optimal time to purchase multi-family residential property? With the impending recession, what are some considerations for aspiring investors? What echelons of property should be honed in on? Which should be avoided? New member here, so if my post is in the wrong location or structured incorrectly, please let me know. Thanks!
Specialist · New York City, NY · Member since 2019 · 34 posts · 111 votes
7y
@James C Norman Jr
Ideally, the optimal time to buy is when everyone is selling and running for the hills, when it's a buyers market. Right now, the markets across the country are overheating and it's a sellers market. Sellers can demand all cash, a fast closing and get offers above asking price too. It doesn't mean you shouldn't be a buyer, only that it's significantly more difficult to find a good deal.
In addition, unless someone has a crystal ball, there isn't a surefire way to know when the next downturn will come about. It can be in a month or 2-3 years from now, no matter the dire predictions we constantly hear.
If an investor is savvy enough and has the means and patience to wait, potentially another 2-3 years or more, properties will be selling for steep discounts to what they are going for now and will put some of the best deals you can find now to shame. Warren Buffett is sitting on $122 billion in cash just waiting for the next opportunity. Buffett is very savvy, patient and disciplined to do so.
There are still deals out there and plenty of profit to be made with the current market conditions, just depends on your investment profile.
Tukwila, WA · Member since 2019 · 70 posts · 88 votes
7y
@Sam Shueh. Thanks Sam. That’s exactly what I was pondering. I’m sticking to my $400k budget because I can carry that mortgage with ZERO tenants. $450k at the most.
Investor · Las Vegas, NV · Member since 2017 · 321 posts · 524 votes
7y
@James C Norman Jr you'll move out here to Vegas, drive past the small multi families, become less interested in owning a multi family, then look up the asking price and be astounded at how people are buying these 4plex for the prices they're selling for.
I would steer clear of 4plex in Vegas right now unless you can get a 40% discount magically.
And you're talking about putting down 0% with VA loan.....you'll be paying more out of pocket to house hack than it would be to rent.
keep in mind once you purchase and if its a rental most likely during a recession your rental continues to perform and well you would not sell during a recession right ??
so for rental buyers I think recessions are non events.. and keep in mind with BP so many started after the GFC that's their only experience with a recession and the GFC is more of a great depression than a recession.. you can have a recession that does not TANK the entire worlds economy like the GFC did.
and they don't last for ever.. next one could last a few quarters or maybe a year.. Also keep in mind if it is a deep deep recession and really bad times.. many buy and hold investors if they don't have cash will be locked out of the market as lenders will pull in their horns.. Like in the GFC you could not get an investor loan for 3 years or so.. at least the average investor could not. that's why prices fell so bad and only those with cash were able to buy.. that's why foreigners with cash cleaned up if they choose right and did not buy ghetto dogs.
I have a friend who we've partnered with here. He had 200+ properties before the recession and then bought even more when everyone else was having problems. He told me that he had no perceivable damage during the recession, in-fact he made a killing when Arizona was first exploding. Renters in the right area will always be there.
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
7y
@James C Norman Jr stop listening to CNN and MSNBC. We are nowhere near a recession. Maybe in a year or two, but not now. The best time to buy a rental property is 10 years ago. The second best time is now. Only buy when there is an opportunity for a deal. You can't just call a real estate agent and tell them you want to buy a multi-family. You will be over paying. You must know your market and how to calculate an acceptable rate of return.
Tukwila, WA · Member since 2019 · 70 posts · 88 votes
7y
@Anthony Dooley. Thanks Anthony. Just trying to have my T’s crossed and my I’s dotted, before I jump in head first. I’ve only purchased a single family home (which I lived in) which was a new construction, so I’ll be dealing with two unfamiliar factors: deferred maintenance and tenants.
Investor · Las Vegas, NV · Member since 2017 · 321 posts · 524 votes
7y
@James C Norman Jr I'm a proponent of any strategy that makes money and aligns with one's goals. BRRR basically isn't possible in Las Vegas and I don't have interest in buying/holding SFR.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
7y
@James C Norman Jr One thing to consider and a reason I like quads is that you can easily get residential fixed-rate, 30 yr. amortized loans whereas 5 units and up is considered commercial and hard to find anything besides adjustable rate loans with balloon payments. If you're stuck trying to refi into a different loan product, or have to sell or come up with cash from other investment vehicles during a downturn because you've got a hefty balloon payment coming up, that could be trouble. I have commercial properties too but I feel safer about my 4 unit buildings due to being locked in with low interest loans on them with no ARM or balloon.
Tukwila, WA · Member since 2019 · 70 posts · 88 votes
7y
@Steve K. Thanks Steve. Those were my sentiments, exactly. Especially considering the fact I have no experience in multi-family dwellings. I guess the underlying concern I have is how differing economic groups would respond to a recession. Through research, I’ve heard investors categorize properties into different groups (A, B, C, & D properties). Depending on the property type, there is a commensurate lease cost to the tenant, thus economically stratifying the tenant pool. Does anyone who invested during the last recession have any experiences they care to share? What were some of the challenges you encountered in collecting rents and maintaining occupancy rates during that time? What class of properties were these “trials and tribulations” associated with?
Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
7y
Buy your fourplex. Make sure it’s in a nice, solid B neighborhood. If things go south the people living in a class will be downgrading. Things keep going good.... the C class tenants will be upgrading. You’ll be good. Just don’t panic and fire sale the thing if we hit a speed bump.
Tukwila, WA · Member since 2019 · 70 posts · 88 votes
7y
@Tanner Marsey thanks for your perspective! I’ll stick to my budget, so I can cover the costs regardless of tenant occupancy. Definitely in this for the long haul!
@Steve K. Thanks Steve. Those were my sentiments, exactly. Especially considering the fact I have no experience in multi-family dwellings. I guess the underlying concern I have is how differing economic groups would respond to a recession. Through research, I’ve heard investors categorize properties into different groups (A, B, C, & D properties). Depending on the property type, there is a commensurate lease cost to the tenant, thus economically stratifying the tenant pool. Does anyone who invested during the last recession have any experiences they care to share? What were some of the challenges you encountered in collecting rents and maintaining occupancy rates during that time? What class of properties were these “trials and tribulations” associated with?
The last recession was more location specific than property type or economic group specific: certain areas of the country got hit super hard across all asset classes and are just now recovering while in other areas appreciation merely slowed down a bit and maybe had slightly higher than normal foreclosure rates but most people weren’t directly affected unless they had to sell off stocks or lost their jobs. That was the case in my area: property values and rents continued going up just not quite as fast and vacancy rates stayed low across all property types. The next recession? Neither I nor anybody else has any clue. I recommend buying the highest overall quality property you can afford in an area with solid underlying fundamentals (jobs, population growth, good schools, low crime, desirable area with high appreciation potential), don’t get over-leveraged, have sufficient liquid cash reserves, get as much cash flow as you can, manage your properties or property manager well, take care of capex issues before they domino, excel at your day job until your rental income is enough to cover all your expenses and fund your retirement, and you’ll be fine even if we go into a recession. If you’re in it for the long haul you’ll likely be holding through several downturns.
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
7y
The optimal is now to buy a mulit-family residential property. Now, you want to put a substantial DP and ensure that the property will cash flow. Since, none of us has a crystal to predict the future, its always best to act now.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
A recession primarily affects discretionary spending. That is optional things you don't need to purchase like vacations and luxury items. My absolute favorite thing to do during a recession is go on vacation. Hotels are half empty, airfare is cheap and you get good service. Of course on the flip side, vacation areas get disproportionately affected negatively by recessions. Less tourists means less workers needed and also means less housing for those workers.