Newbie Interested in Naturally Climate Resilient Multifamilies
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Isaac LarsonBusiness Member
Realtor · Minneapolis · Member since 2020 · 13 posts · 16 votesI definitely think about climate change and it's effects on the country in the long run quite frequently, but much like Tim, haven't considered it much while investing as I too live and invest in MSP. That being said, should I decide to invest out of state in the future I do think it's something I will take into consideration, as quality of living in any given city will directly affect the income an investment can produce and the general tenant pool for a given area.
With your first property being a owner occupied, you will be limited to areas you want to actually live and work in, so it seems that will likely be the driving factor of what city your first investment property is in. I am glad to hear you are interested in purchasing owner occupied multifamily, and truly think it's one of the best investments you can make when you're young to set yourself up for the future! It's also a great, relatively low risk way to get your feet wet in real estate investing to find out if it's something you would like to pursue more for future investments. Best of luck!
12 Replies
- 4yTim SwierczekPro MemberLender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
@Danny D. I don't consider climate threats when investing. Maybe it's because I live and have invested mostly in Minneapolis and St Paul. I wouldn't invest in the 9th ward or NOLA anytime soon, but otherwise, insurance covers much of what you mentioned. I'd focus on an area that you want to live and work and if that is also an area that does not have these threats, then even better, but if your ideal job is in a threat area I wouldn't pass up buying there due to the threats.
Converting a house hack to a rental is relatively easy. Many areas have easier rental licensing standards for owner-occupants, so you may want to check out the rental licensing laws to see what standards you need to meet once you move out. Other than that your house hack loan will require you live-in the property for 12 months, then you are free to leave. - 4yBonnie LowPro MemberLender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
@Danny D. you're one of the first investors I've heard give a nod to our changing climate. I think it's a legitimate question and, in fact, it is something we take into consideration when investing. It's why we won't buy in the sunbelt states that are so popular but where lack of water is going to become a more urgent problem. There was a very good article on BP about a year ago about impacts of our changing climate, particularly in areas subject to drought, high heat and humidity. Climate experts predict the high heat and humidity are going to make much of the Mississippi River valley uninhabitable. Let's hope it doesn't get that dire, but if you're a buy and hold investor and looking to own for the long term, it's definitely something to take into consideration. Those areas are ok now, but having known homeowners whose wells have gone dry (we live in an area with a lot of wells and septics) and entire neighborhoods where the water table has dropped to critical levels, it is a real concern. We're looking primarily at northern states with lots of rainfall and ground water.
- 4yIsaac LarsonBusiness MemberRealtor · Minneapolis · Member since 2020 · 13 posts · 16 votes
I definitely think about climate change and it's effects on the country in the long run quite frequently, but much like Tim, haven't considered it much while investing as I too live and invest in MSP. That being said, should I decide to invest out of state in the future I do think it's something I will take into consideration, as quality of living in any given city will directly affect the income an investment can produce and the general tenant pool for a given area.
With your first property being a owner occupied, you will be limited to areas you want to actually live and work in, so it seems that will likely be the driving factor of what city your first investment property is in. I am glad to hear you are interested in purchasing owner occupied multifamily, and truly think it's one of the best investments you can make when you're young to set yourself up for the future! It's also a great, relatively low risk way to get your feet wet in real estate investing to find out if it's something you would like to pursue more for future investments. Best of luck!
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes4y
You can google most climate resiliant areas in the US and the area around the great lakes will come up. I am lucky to live and invest in Milwaukee. We don't have droughts, fires, hurricanes, earthquakes, floods or rising ocean levels. We do have winter, but it seems like they are getting milder in the last 5 years. Curious to see what 2021 brings...
We are getting a lot of residential relocation clients from the southwest - number one reason I hear is smoke from fires, followed by cost of living and fresh water.
- 4yJustin WindhamPro MemberBanker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes
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There are some pretty nice discounts on many products and services offered as Perks to BP members that you might want to check out: https://www.biggerpockets.com/perks/pro
The site has quite a few tools that can be helpful for new members. For example, if you are looking to connect with other members near you, want to learn from people in a specific area you’d like to invest in, or have a desire to find people interested in certain topics, you could use the search feature here: https://www.biggerpockets.com/search/users
- Member since 2020 · 983 posts · 1k+ votes4y
Originally posted by @Danny D.:
I'm new to real estate investing and interested in purchasing a multifamily home (duplex or triplex) in Cleveland, OH or other naturally climate resilient and affordable markets. I'd likely purchase initially through FHA or a conventional loan due to lack of capital for down payment on an investment property loan. Have others bet on cities like Cleveland, Milwaukee, Minneapolis, etc given the relatively low climate threats in these areas? Anyone know the implications of trying to convert a FHA/conventional owner-occupied mortgage to an investment property in the case that my partner and I would want to move somewhere else but retain the property?
I'm also very interested in REITS but I haven't found any that are being realistic enough about climate threats related to natural disasters, floods, heatwaves, freshwater access, etc.
I've been looking in Cleveland and Columbus Ohio for the past 6 months and there I am finding the best Cap Rates or Cash On Cash Returns in Cleveland. The thing that scares me about Ohio is the rents per unit are so low I am wondering what the room for rent increases is because investors don't get rich paying down the mortgage and collecting rents. The real money is earned from the increasing of rents and the increased property value that resulted from the increased rents that results from the increase Cap Rate, or the rule-of-thumb Gross Multiplier.
If anyone has any good properties in Columbus or Cleveland I am 'All Ears'. I look at properties every day.
- 4yRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Originally posted by @Account Closed:
Originally posted by @Danny D.:
I'm new to real estate investing and interested in purchasing a multifamily home (duplex or triplex) in Cleveland, OH or other naturally climate resilient and affordable markets. I'd likely purchase initially through FHA or a conventional loan due to lack of capital for down payment on an investment property loan. Have others bet on cities like Cleveland, Milwaukee, Minneapolis, etc given the relatively low climate threats in these areas? Anyone know the implications of trying to convert a FHA/conventional owner-occupied mortgage to an investment property in the case that my partner and I would want to move somewhere else but retain the property?
I'm also very interested in REITS but I haven't found any that are being realistic enough about climate threats related to natural disasters, floods, heatwaves, freshwater access, etc.
I've been looking in Cleveland and Columbus Ohio for the past 6 months and there I am finding the best Cap Rates or Cash On Cash Returns in Cleveland. The thing that scares me about Ohio is the rents per unit are so low I am wondering what the room for rent increases is because investors don't get rich paying down the mortgage and collecting rents. The real money is earned from the increasing of rents and the increased property value that resulted from the increased rents that results from the increase Cap Rate, or the rule-of-thumb Gross Multiplier.
If anyone has any good properties in Columbus or Cleveland I am 'All Ears'. I look at properties every day.
I have increased the value of a lot of my homes by increasing the rents. Top rents in Columbus, Ohio are starting to climb rapidly now too.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
I wouldn't be too concerned about climate when buying a property, (obviously don't buy next to the levee in NO as was said) just be aware of the weather as it affects your area. Most climate hyperbole is exaggerated anyway, so just make your decision based on the housing market info, not the weather.....my .02
- Member since 2020 · 983 posts · 1k+ votes4y
Originally posted by @Bruce Woodruff:
I wouldn't be too concerned about climate when buying a property, (obviously don't buy next to the levee in NO as was said) just be aware of the weather as it affects your area. Most climate hyperbole is exaggerated anyway, so just make your decision based on the housing market info, not the weather.....my .02
In general, you cannot increase the resale value of a home by increasing the rent because single family homes sell for comps and the asking price is never based on the income. You can buy a fixer-upper for a discount, fix-it-up and increase the value, but not by increasing the rents and the problem you have with single family homes is once you reach the comps you are finished with forcing the property to appreciate. With multi- unit properties, the asking price is not based on comps. The a asking price is based on the gross income, Cap Rate, cash on cash, or whichever math investors prefer and there is no limit to how much a multi-unit property can appreciate. It is possible for 1 of 100 indentical multi-unit properties to sell for double the price of all the others only because the rents are double the others and this cannot happen with a house. Sorry!!!
- Architect · San Francisco, CA · Member since 2017 · 89 posts · 41 votes4y
@Danny D. I live in CA and invest in OH, where I was born and raised. I have looked into this, considering CA’s increasingly prevalent fire season. Ohio has been seeing an increase in annual rainfall, which I believe will continue in the coming years. Here is an interactive map that I feel gives some insight: https://www.nytimes.com/intera...
I do believe that in 20-30 years, Midwest markets like Cleveland, Detroit and Pittsburgh will be even more desirable given their proximity to fresh water and they all have existing infrastructure to support larger populations.
Of course this is all speculation though.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes4y
Originally posted by @Lesley Ray:
@Danny D. I live in CA and invest in OH, where I was born and raised. I have looked into this, considering CA’s increasingly prevalent fire season. Ohio has been seeing an increase in annual rainfall, which I believe will continue in the coming years. Here is an interactive map that I feel gives some insight: https://www.nytimes.com/intera...
I do believe that in 20-30 years, Midwest markets like Cleveland, Detroit and Pittsburgh will be even more desirable given their proximity to fresh water and they all have existing infrastructure to support larger populations.
Of course this is all speculation though.
I live in Pittsburgh. I've lived in nicer places.
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