Any property better than no deal?

Question

There isn't a ton of inventory where I am. I want to house hack. Buy a multifamily do that whole thing. I've run the numbers on a duplex and they work. It's not fantastic, but I can save for cap ex and repairs every month while still paying a few hundred less than I am right now in rent.

Is it worth it? I can start building equity, and saving more money a month. If there were a 3 or 4 unit I would more likely be doing better than that, but there aren't any. Wait and find a better deal or start making progress today?

Leland Barrow · Answer

Real estate ties up resources. Having resources for a great deal is far more valuable then owning an ok deal. I dont think REI follows the logic that a bird in the hand is worth two in the bush. In my personal opinion stretching yourself thin at the top of a market has a lot of risk. The reason there is no inventory is because we are at or near the top of a market cycle. Buying a marginal property now could very well mean owning a slug if the market dips. The number one rule of business is that money is made when you buy not when you sell.

Wade Sikkink · Answer

Sage advice here in this thread, no doubt.  Market timing is a difficult game whether it's real estate or the stock market, and everyone has their own idea.  I do agree that in many cases no deal is better than a bad deal, but it sounds like this isn't a bad deal, maybe just not a blockbuster one.  Time is also on your side regarding holding period.  If you are like Warren Buffett and expect to hold your investments forever, then if we are approaching a cyclical top in your local market won't matter much.  20 years from now when you still own that property you'll be glad you didn't wait until tomorrow to plant that tree.

Good luck.

Wade Sikkink · Answer

Have you heard the old saying, when is the best time to plant a tree?  20 years ago.

Real Estate is a get rich slowly game so you have to get started and be patient.

Real Estate makes money in 3 ways, cash flow, appreciation and mortgage paydown.  Sounds like there is cash flow, just not great.  You would be playing more toward appreciation and paydown.  House hacking is a great way to get started and in my opinion the numbers don't need to be as good because it's also your residence.  If your market is really tight then appreciation is probably a good possibility for you.  I'd say go for it and get started.

Good luck.

Matt Gehrls · Answer

Thank you everybody. I don't plan on appreciation and don't expect it will appreciate much. I've done more analysis and the numbers actually look solid if I rented both units, and even when I don't I'm saving enough a month and building wealth. I agree that the market here shouldn't tank for a while. Even if I don't buy at exactly the right time, the numbers work for me today and I don't plan on selling it for quite a while.

Cory Mccarthy · Answer

@Matt Gehrls,while I respect everyone's opinions here and there is a lot of sage advice for sure, one of the things that I think a few people that are a little further away from you might not understand is the strength of the Grand Rapids market right now.  Based upon the growth rate you are experiencing right now and the projections for the next 5-10 years, your market is far from peaking, rather just taking off.  As you will be living there, your deal does not have to be great.  Any reduction in rent in a market appreciating and cash flowing the way GR is right now is probably a very good deal.  Jump on it.  In probably less than two years, you will likely be in a position to refi, combine with the savings you have generated over this time, move out and repeat and have a great performing asset on your hands.  I wouldn't hesitate a minute knowing all of this about this market and the lack of inventory there right now.  There are lots of great investors over in that market that may also chime in and provide some good advice.  I am not connected to them so I can't tag them here, but have seen many great posts and hopefully they have key words linked to Grand Rapids, MI and will see this thread to provide more insight.  Best of luck to you Matt!!

Jacob Sampson · Answer

no renter is better than a bad one and no deal is better than a bad one.  If this is your first and it looks marginal the reality is it's probably even worse than that.  We all over estimate deals when we are starting out.

Brian Larson · Answer

I agree with Leland. if you think the deal is 'marginal' then it might be best to wait. I know it is exciting and you want to get started. I also know that when you start hearing about low inventory and expected appreciation...well, it might be time to assume that may not happen.

In my mind, you will do great with a house hack either way but i would stay beholden to the cashflow and NOT assume appreciation or worry you will be priced out. I do not know your market but if its like many others, there is a chance we see a downturn in the next year+

I also would look for one that is not recently rehabbed. Save some cash and fix it yourself. The best way to future proof your investment is to add the value/equity yourself. Even if the overall ARV drops some, you didnt pay the ARV, you paid well below and added value on your own.

Corey Melkonian · Answer

Hi Matt,

I agree with Wade and am a firm believer in the old saying with the plant a tree analogy, I think there is a second best time to purchase a property and that's now, (same as the tree analogy). Good luck, go for it and don't look back or you'll what if yourself forever.

Tim VandenToorn · Answer

Matt, maybe I missed something but when it comes to house hacking what are your goals.  Price location etc.  I come across several duplex's a month both on and off market.  If I know of something that fits within your goals I will gladly pass that along to you.

Jason Carter · Answer

Good advice here. But I agree with @Cory Mccarthy. I'd normally agree with the early commenters on waiting for a great deal but with some knowledge of the GR market I don't see things taking a nose dive anytime soon. Now if you commit to some sort of marketing/networking strategy you may find one. Hard to say how much time that might take though. But you could do both. Get on the duplex and get going. Get your building fixed up, get those rents up, meanwhile market and network to find that great deal on a fourplex. Move into that next. (Or wholesale it to me ;) ) Get those rents up and repeat. You'll be there before you know it. Best of luck to you!

Any property better than no deal?

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