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.
Investor · Miami Beach, FL · Member since 2014 · 123 posts · 19 votes
7y
People say there's going to be a recession every year. I think now I've been hearing it more than ever in recent history though. The sentiment alone may trigger one, as more people are starting to get cautions in anticipation one is coming and cut back their purchasing. For me the property prices don't make any sense anymore in my area. You can't cashflow a 4-5 cap multifamily unless you own most or all of it. And with a condo you could own it outright and still lose money if you rent it. So if a recession came along and rents stagnated or went down, and the occupancy rate went down it would perform pretty poorly, not to mention the loss of value. It's a different story in other parts of the country. For me I'm not buying right now. Even if we sidestep a recession in the short term, it's coming and I'm going to be patient and see if prices pull back so I can get in then. If it never comes, then I'll just never own in my area and start looking into places where I can make money.
Rental Property Investor · Nashville, TN · Member since 2019 · 7 posts · 5 votes
7y
@James C Norman Jr
“Impending recession” is fake news. A LOT can happen in the next two years including USMCA, a deal with China, deals with the EU and deals with the UK that will throw gas on an already hot economy. People need to understand the last recession was the “Great Recession.” It was a perfect storm for the housing market. Most recessions don’t affect housing to that degree. That’s why real estate is one of the best investments. This article is a good read.
Welcome to Las Vegas..........soon to be resident. Las Vegas is my niche, as like most visitors, I decided to try something else than losing money at the casinos. Since, Mar'14, I bought 3, 4plexs, did a condo flip, and sold 1 4plex. Most on BP are correct in sense that most 4plexs are in bad areas, are older, and rarely are 4plexs newly built. However, there are certain areas better than others. Once, you moved to Las Vegas, and drive to the various areas of Las Vegas, you will know what I'm saying. The good niche areas are west of I95 (450k) Chinatown area known as Spring Valley (400k), and near strip off Maryland (350k-400k).
Here's one fact that no one will tell you. If you search any MLS or Redfin site, at any given point, there are available listings for SFR (5688), condo/townhome (2080), and multi's 2-4plex (98). When you do the math, 98/5688 =1.72% or roughly 2%. Or another way to view is there are 2 multi's for every 100 SFR. This unique supply will always be low compared to homes, and keep prices up.
You mentioned that you do not like HOA's and will use property management company. No one likes HOA's, as most will run 600-700 a month. However, if you find HOA's that will include water, sewer, and trash, this is normally a $200 month expense. I suggest being open to HOA's if they include utilities. I know a 4plex complex that is about $660 a month, includes water, sewer, trash, gated community, security, pool, and 1 car garage near the strip. How do I know? Because I own 4plex in complex. Also, management company's charge 8-10%, equivalent to $300 a month. I would suggest against, as you will live in Las Vegas. I'm actually from southern California, and manage my own units.
Rental Property Investor · Martinsburg, WV · Member since 2017 · 111 posts · 81 votes
7y
@James C Norman Jr I can't speak to any impending recession without the aid of my trusty crystal ball. If the deal makes financial sense, actual sense with multiple exit scenarios, go for it. Just like when planning to have a kid, "now" can easily become not the right time in perpetuity.
We have sold a single family in NoVA, purchased a triplex in WV, and purchased a quad with a built-in rehab loan within the first seven months of 2019, and none of those choices have seemed overly risky from our perspective. Everything is working as anticipated, but we run pretty conservative numbers as well.
Contractor · Tulsa, OK · Member since 2019 · 12 posts · 4 votes
7y
@James C Norman Jr. I'm new to forum, but it will be tough using a VA loan in a sellers market. VA will require pest inspection and clearance. In this market most sellers are selling as is and with the easiest of financing or all cash. If you are a seller and you're looking at conventional loan offer at the 20 % down and 45 day closing and another offer at 0 down VA and 60 day closing with possible repairs to be factored in after inspections which would you go with ? I'm not saying you can't find a deal with a VA just that it will be harder because the property has too be squeaky clean. VA loans work easier in buyers markets where sellers are a little more motivated to make repairs and such. Any lenders reading your question may help by adding to this I'd appreciate.
Tukwila, WA · Member since 2019 · 70 posts · 88 votes
7y
@Henry Lazerow Thanks Henry. My concern is being able to find gentrifying areas where the numbers work. The gentrifying areas I've seen seem to have HOA's which significantly cut into profit margins, but I'll definitely keep my eyes open for good deals using your logic. I'd really rather save my hard cash for a 2nd property with a conventional loan, or maybe even hard money lending...
Tukwila, WA · Member since 2019 · 70 posts · 88 votes
7y
@Scott Kibby Very true Scott, but Vegas has some unique dynamics due to its discretionary economy. When the last downturn befell the city, many people cut their losses and fled the area. Neighborhoods with HOA's, which includes C class Fourplexes divided HOA' dues amongst remaining owners which drove up overheads tremendously. There are many factors for me to consider, so I thoroughly appreciate your input!
Tukwila, WA · Member since 2019 · 70 posts · 88 votes
7y
@Terry Lao Thanks Terry, but unlike you, I'm a novice with "skin in the game." I might be overwhelmed with property management duties since I work full time and overtime hours currently and plan to continue this trend once in Las Vegas. Noteworthy considerations regarding HOA's. I never looked at things from that perspective. Thanks for your insight!
Tukwila, WA · Member since 2019 · 70 posts · 88 votes
7y
@James Edwards. Quite thought-provoking. My first home purchase was with a conventional loan, so I don't have any experience with the VA Loan, at this point. Thanks James!
I was a novice. Everyone is a novice in the beginning. Once you avoid or eliminate the 4plexs with HOA's, you pretty much eliminated over 75% of 4plexs available. You will have 25% remaining 4plexs in bad areas. Yes, the good 4plexs are in good areas with HOA's.
Here is the key. Obtain a home owner's warranty policy. This is especially easy to do in the first year. In fact, have it written into your offer. Any buyer will pay for one in the first year, and the first year pricing is really low, around $700. This is what I had in contract, and said if it is worth it in second year, do not renewal. I realized this is a life saver, as the first year, you will find out that AC and heater often break down in summer and winter. Without one, one visit in summer will cost you over $300-400 for something simple. Another is to find a local handyman and appliance contact. All this items I mentioned will cover 90% of possible issues.
You might have glossed over my initial email, but in my email I mentioned a 4plex in gated community and a one car garage. In all the listings I've seen in Las Vegas, there is only one 4plex complex that I know had a garage for each unit. The garage is gold.
Rental Property Investor · Reno, NV · Member since 2019 · 23 posts · 14 votes
7y
Great thread going here and I'm interested to follow your multi-family journey. I'm also in a similar situation where I'm exploring buying a 4-plex using my VA benefit for an owner/occupier. I'm up in northern Nevada and it's slim pickings as far meeting the metrics in order to move forward on a property if I went that route though. Best of luck and welcome to Nevada soon!
I was a novice. Everyone is a novice in the beginning. Once you avoid or eliminate the 4plexs with HOA's, you pretty much eliminated over 75% of 4plexs available. You will have 25% remaining 4plexs in bad areas. Yes, the good 4plexs are in good areas with HOA's.
Here is the key. Obtain a home owner's warranty policy. This is especially easy to do in the first year. In fact, have it written into your offer. Any buyer will pay for one in the first year, and the first year pricing is really low, around $700. This is what I had in contract, and said if it is worth it in second year, do not renewal. I realized this is a life saver, as the first year, you will find out that AC and heater often break down in summer and winter. Without one, one visit in summer will cost you over $300-400 for something simple. Another is to find a local handyman and appliance contact. All this items I mentioned will cover 90% of possible issues.
You might have glossed over my initial email, but in my email I mentioned a 4plex in gated community and a one car garage. In all the listings I've seen in Las Vegas, there is only one 4plex complex that I know had a garage for each unit. The garage is gold.
Terry
Terry
I distinctly remember some fourplex listings with garages that appeared to be from the same complex, and yes Terry, there was a HOA! They would be a consideration, if the numbers made sense. What class property would you consider your current garaged units?
Great thread going here and I'm interested to follow your multi-family journey. I'm also in a similar situation where I'm exploring buying a 4-plex using my VA benefit for an owner/occupier. I'm up in northern Nevada and it's slim pickings as far meeting the metrics in order to move forward on a property if I went that route though. Best of luck and welcome to Nevada soon!
Thanks Scott, for your words of encouragement Keep me posted on your journey, as well!
Real Estate Agent · Belmar, NJ · Member since 2017 · 370 posts · 200 votes
7y
@James C Norman Jr
Great mindset and head on your shoulders. I would look at it from a cash flow point of view versus doors. If you bought two duplexes and after PM they netted 200 a door versus the 4 plex at $250 a door or vice versa I would choose the situation that nets a better P&L.
Regarding the use of loans - I don't know if the $0 VA loan has PMI but if it does I would just factor that into the numbers for whatever you purchase with it.
If it doesn’t, then I would use that for the largest unit you plan to purchase and just make sure your monthly rent numbers are spot on - talk to local agents and use Rentometer, Craigslist and local investors to confirm what they say.