Should I buy another 3 decker in Worcester MA now or wait

Question

Good afternoon all,

I just want your input because we want to buy another 3 decker to add to our portfolio but as you all know the price is very steep now.  If we are able to work out our number such as increasing our down payment in such a way that we get minimal positive cash flow and obviously just wait for a few years for appreciation to work its magic, would that be a good reason to buy now? Or should we wait?  Thank you so much for your input.

Jonathan Bombaci · Answer

Hi @Quan Tran I'm a big believer in NEVER buying a multi-family property that isn't cashflow positive. Or at least have a plan to get it to be cashflow positive in the first 12 months. I have a team of 11 investor focused agents, 3 of which focus on the Worcester market, and we help many investors find cash flowing properties. Assuming your reasonable with your numbers there are many out there, the problem is they don't sit on the market long. The name of the game is speed to market, see somethign good, go see it IMMEDIATELY and make a decision before you leave the property. If it's not the right one then move on, if it is worthy of an offer then get it in before the end of the day and try to force the seller to make a decision.  Grab the good ones before the bidding war can start.  There are plenty of options in the greater Worcester market where you can still find a 3-5 unit properties that will cashflow within the first year you just need to get a little creative and be open to opportunity when it comes up. Mixed use properties with a benign commercial space (barber shop or salon) could be a great option for you. You can use a residential loan to buy them in most scenarios and you can get a 4 unit mixed use property (1 commercial 3 residential) for less than an triplex in most markets. There are many market niche's out there that result in less buyer demand but just as good cashflow.

I own 65 units, we're closing on a 2 family in Lowell tomorrow and I have another 13 units (6 unit in Fitchburg, 5 unit in Pepperell, and 2 unit in Fitchburg) under agreement. I'm still buying, but they all cashflow!Best of luck. Let me know if you have any questions.

Jon

Brian J Allen · Answer

If i told you that all real estate prices were going up around the country(except NYC) and rents continued to rise, and there was a high probability of inflation on the horizon what would you do?  Currently Worcester 3 deckers are on the rise, but there are still deals.  Those deals are based on stable locations and future rents and vacancy projections, not on current rents.  If you believe in dollar cost averaging in the stock market and keep putting $ into your 401k then maybe it is a good/wise investment.  If you are already collecting rents and managing your property, it is probably good as well.  You look at the stock price of Google and Amazon and Tesla and say, those are too high, but in 10 years will you be happier you bought those or would you be happier you bought General Cinemas or American Airlines?  Keep in mind the only way to find deals is to find them off market where about 30% of the 3 deckers trade.  Our clients are continuing to buy since we can find deals for them