Brrrr in Albuquerque and surrounding area

16 Replies

Hi, nice to meet all of you that I will be learning from here. I've been trying to read before I opened my mouth in the forums, but it seems like there were a lot of locals willing to help answer each other's questions. We live in a a tough but great city, so it's good to see people looking out for one another. I think people improving housing can really start to change areas here. My plan includes mfr/sfr buy and hold as rental following the brrrr strategy with a hard money start and a refi through a local broker who can do delayed financing. I want to take a year to have relationships ready, raise my familiarity with the process, and learn what not to buy before I start making deals. Any major flaw to this in Albuquerques market? Go Lobos, Jon

Welcome @Jon Paszkiewicz ! ABQ is a great place to BRRR. It is one of my favorite strategies.

A great way to meet other local investors is to come out to the local investor meetings.  The one I host is this week on Wed (meetup.com/abqreia) the other 2 local meetups are listed on the meetup.com website as well (NMACRE and Lets talk real estate).  Look forward to meeting you in person soon.

ABQ Apartment Investors is a good REAI as well.  I think ABQ is a great market and has similar allures that C-Springs has.  But as is true in many markets, this place is street by street.

Thanks, Frankie. Do you guys find more frequent success buy and holding multi or single family properties around Albuquerque? I know it depends on the deal but I was on loop net and saw whole mfr portfolios for sale. Is that normal?

I see a lot of single sfr for sale they wouldn't take much rehab in Rio Rancho and Bernalillo, but the rent that I've researched is just "OK" and wouldn't really generate much income after expenses. The property would just kind of tread water and be nice to sell when the market is right. 

I've not looked up in Santa fe or taos. I plan to avoid anything rural. 

I'm kind of risk averse and would rather be assured a little cash flow. A wholesaler or realtor can probably find better deals than what I've seen for sale, but is the suggested 2% too high for sfr? Is it achievable with mfr? 

@Jon Paszkiewicz , I have been checking ABQ out for about a year now, and have spoken to a few brokers, lenders, etc, and run numbers but mostly on MF. 

I think basically the deal with ABQ is that there is very little growth and very little new inventory coming online, which means on the one hand you are protected from rising vacancy but on the other investment RE is expensive for what it is, as no new inventory comes online to push down prices. According to Berkadia a measly 249 units were added YOY with demand of 405 still exceeding new supply. I mean those are really really low numbers. But rents will keep growing! That class C building with the same tenant demographics in Dallas or Houston might be cheaper, but in ABQ it's pricing seems more robust due to less competition. 

For whatever it's worth I don't really see why SFR's would be the way to go in that city, unless like @David Torres you had a deal pipeline and flipped in conjunction. SFR from my perspective works best in a lot of post industrial towns - Chicago, Cleveland, Philadelphia, Baltimore - where rowhomes proliferated lending the stock an even greater level of standardization than most apartment building have internally along with a very low cost/unit and an outsized ARV on a refinance. The other great thing about those areas is that labor costs run high and regulatory climates are severe, bottlenecking development of new apartments and giving a unique value proposition to single families for rental conversion. ABQ may not be super easy to develop in due to national parks and reservations but its regulatory climate is much warmer (another good reason to buy there, although the whole Southwestern region is spoiled this way - no idea how good they have it). Besides that despite being an "old" city so much of ABQ was built post 1950's that there is less value to unlock through rehab as opposed to a town where the average age is 90-100 yrs old. Thin margins on rehab ARV, thin margins on rent, no unit standardization, larger lot sizes that are less tax advantageous, and frankly not enough people doing it to make an exit predictable and easy. I've spoken to quite a few people and no one seems to know anyone there with over 100 SFR's. On the east coast you can't not deal with people who have 300-400 plus SFR's and even here it's tricky to find a good buyer to unload a ~10+ unit package too. Who can you sell 20 single families to in ABQ? At what Cap can you sell them? My guess is the houses are in class C areas because they had to be, for ARV and cash flow purposes, but are unlikely to operate at a high enough Cap to justify a buyer not just moving on an APT building instead. You may not care about selling them, which is fine, but just know that going in. The other issue is low liquidity from debt providers in ABQ for that asset -- they want really stiff terms, have low lending limits. Meanwhile MF opens you up to national debt providers.

As far as BRRR goes I think it would be really great there. As I was saying competition is weaker there from new inventory, leading to more undifferentiated product than say Denver, or Dallas. So much of the stock looks simple and utilitarian. It seems like an easy enough place to create value merely by providing something "cool". MF has lots of potential as so much of it is distressed and apparently absentee owned. I would by 2 to 4 unit properties, BRRR them, keep it moving, and scale up.

As far as portfolio sales go, the hotter the market/asset class, the more of them you will see in general. 

Thank you for the detailed response! I'm in spot where if it saved me down money, I should be able to live in a multi unit if I buy it. I don't know a lot about this type of loan. My (old) primary residence is rented already. I've yet to talk to any owners and I'd rather be ready with financing lined up. I've already spoken to some lenders and credit unions basically just saying "this is what I want to do". Some were all about it, some seemed ruffled that I asked for anything other than an FHA primary residence. Once I've got a lender and a plan, is there a better way than surfing loopnet and hubzu, etc?

@Jon, yes I think an FHA on a 4 unit is a great plan. I would start now by trying to get on as many wholesaler and broker email lists as possible for deal flow, and possibly getting licensed to gain access to the MLS, at the very least for comp analysis. If it's listed online it's probably not a great deal. Good deals tend to come from your network, or direct from seller. Meet as many agents, wholesalers, and investors as you can. And don't focus on developing a "professional network". Focus on developing a network of friends, who happen to be RE professionals, and leverage introductions from other pros. That will take you farther, faster. The meetups mentioned earlier in the thread seem like great places to start. I'm also sure BP has many great threads about this.

@William Strother last week I went to look at a couple of properties and thought "if these are such good deals, why are they still available?". You confirmed that the best properties don't hit the open market like that. I Googled Albuquerque wholesale and signed up for a bunch of stuff. Do you think it's a bad idea to post here saying I'm looking for Albuquerque wholesalers, or is that kind of like asking to get ripped off by exposing my naivete?
@William Strother I had a realtor (from Facebook, no less), send me a new batch of MLS MFR listings and most of the ones that would make good candidates to live in are not in areas I would move my kids to. There are however, some pairs of desirable triplexes that the seller wants to get off as a package deal (a potential cash flowing six units sounds nice. I have both a potential partner and my wife does not have a home in her name) but this is would be a ton my money to tie up. The thought hit me that maybe abq isn't super hot for single family right now, but to buy rehab and refi a sfr or two would give me a significantly larger starting cash pile and a much stronger buying position to jump into mfr. Even if the single family didn't produce a lot of income, it might be a stronger beginning move. Thinking about the long game. The deals will still be there later. Thoughts?

This is a great thread, I'm glad I discovered it. I'm from California, and have been in ABQ all this week getting to know the market and looking at SFH with BRRRR potential. I'm a fan of the desert southwest, and of the long term potential here in New Mexico.

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