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Real Estate investing...is this a good time?

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
There is a HUGE SURPLUS of individual homes, and there are people who want to sell homes and downsize. So the way I see it, for the next 5 years there is going to be ZERO growth in the home market.

But that said, what about investing in apartments? There are foreclosures happening daily in the HOME market and the current crop of financial advisors are increasingly pushing people toward the rental market.

I've found some land on a small lake that is already zoned for multi-family building. The community is up & coming but still very modest. Of the communities in this region, it is one of very few that is still showing growth. I'm giving some serious thought to putting up some apartment buildings that overlook the lake. Maybe something like 8 or 10 units at roughly 1000 to 1100 square feet, 2 bedrooms each.

Any thoughts on the real estate market now for investment?

Currently the majority of my income comes from long term leases on commercial property but I'm looking to reduce risk and get out of single-tenant properties.

It seems to me that multi-unit rental property may actually be the one place where investment may be a good choice.
 

jpr62902

Jeanclaude Spam Banhammer
SUPER Site Supporter
I'm looking at rental property, too. My concern with multiple units is bedbugs. They're impossible to get rid of if even one tenant is non-compliant and exterminators ain't cheap.

I don't think you can ever go wrong with residential rental property. One strategy is rent to only the older (55+) crowd. At that age, they should have a steady stream of income, they're more respectful of the property and the turnover is minimal. The downside is that they're a little needier and because their income is close to fixed, they don't respond well to rent increases.
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Bedbugs aside, there will be no real appreciation of value in the single family home market for the mid-term future. Further, its often easier to manage a multi-unit property than a single unit property and it also disperses the risk if you can't find a tenant for your unit you have only lost 1/4, 1/5, or maybe 1/10th of the income while with a single family home you lose 100% of your income if you lose your tenant.

Regarding the older crowd, honestly I'm looking at a multi-floor building and would like to build the entire first floor as 'handicapped accessible' with older folks in mind. Assuming a 2 story building, 50% of the tenants would be targets as older tenants or the disabled.
 

jpr62902

Jeanclaude Spam Banhammer
SUPER Site Supporter
Bedbugs aside, there will be no real appreciation of value in the single family home market for the mid-term future. Further, its often easier to manage a multi-unit property than a single unit property and it also disperses the risk if you can't find a tenant for your unit you have only lost 1/4, 1/5, or maybe 1/10th of the income while with a single family home you lose 100% of your income if you lose your tenant.

Regarding the older crowd, honestly I'm looking at a multi-floor building and would like to build the entire first floor as 'handicapped accessible' with older folks in mind. Assuming a 2 story building, 50% of the tenants would be targets as older tenants or the disabled.

Older tenants who will complain about the toddlers running around (or the loud stereo) in the apartment above them. If you're targeting older tenants, you should fill the entire building with older tenants.
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Agreed; there will always be complaints from some tenants. But making the upper level floor(s) accessible to the handicapped residents now requires an elevator. That is cost prohibitive in a small building and would require then moving up to at least a 3 floor building and probably a 12 unit building, which may not be allowed by the city due to land density usage.

So that said, first floor is easy to make handicapped accessible. Any upper floor would likely be for the fully physically abled.
 

BigAl

Gone But Not Forgotten
SUPER Site Supporter
There is a HUGE SURPLUS of individual homes, and there are people who want to sell homes and downsize. So the way I see it, for the next 5 years there is going to be ZERO growth in the home market.

But that said, what about investing in apartments? There are foreclosures happening daily in the HOME market and the current crop of financial advisors are increasingly pushing people toward the rental market.

I've found some land on a small lake that is already zoned for multi-family building. The community is up & coming but still very modest. Of the communities in this region, it is one of very few that is still showing growth. I'm giving some serious thought to putting up some apartment buildings that overlook the lake. Maybe something like 8 or 10 units at roughly 1000 to 1100 square feet, 2 bedrooms each.

Any thoughts on the real estate market now for investment?

Currently the majority of my income comes from long term leases on commercial property but I'm looking to reduce risk and get out of single-tenant properties.

It seems to me that multi-unit rental property may actually be the one place where investment may be a good choice.


Bob ,
Even if the land is a very good buy the problem I see is still the high cost of having the apartment units built .There are no big saving out there on building new apartments . Building cost are not going down !!! If you could find an apartment unit of need of repair you may do a lot better on the bottom line even after repair/remodel expense .
 

BigAl

Gone But Not Forgotten
SUPER Site Supporter
Agreed; there will always be complaints from some tenants. But making the upper level floor(s) accessible to the handicapped residents now requires an elevator. That is cost prohibitive in a small building and would require then moving up to at least a 3 floor building and probably a 12 unit building, which may not be allowed by the city due to land density usage.

So that said, first floor is easy to make handicapped accessible. Any upper floor would likely be for the fully physically abled.


This is what I did on my new 4 unit apartment complex .All the first floor units are handicapp access . Cost was very little
 

squerly

Supported Ben Carson
GOLD Site Supporter
Having owned a lot of both residential and commercail proberty alike, I am quite sure I would not want to get involved in residential rental again. I've always done well with commercial though.
 

BigAl

Gone But Not Forgotten
SUPER Site Supporter
Having owned a lot of both residential and commercail proberty alike, I am quite sure I would not want to get involved in residential rental again. I've always done well with commercial though.

I agree with you but the times are tough . I stay on top of my renters and require everything in advance . I am not the nicest landlord but if I get a damaged unit the renter knows up front he can kiss his deposit goodbye .Also my units are upper scale when they move in . I am not the lowest price for rentals . I also screen my renters very carefully . Kids are the worst renters , Seniors are great ! Mexicans pay cash !
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Bob ,
Even if the land is a very good buy the problem I see is still the high cost of having the apartment units built .There are no big saving out there on building new apartments . Building cost are not going down !!! If you could find an apartment unit of need of repair you may do a lot better on the bottom line even after repair/remodel expense .
Yup, I realize there are no discounts on on construction.

I have been searching for 6 to 8 unit buildings and there are simply none for sale in my area that are in desirable spots. The only units I can find are in dilapidated communities or areas and that is not the type of rental property I care to deal with.

So it may be that the construction route is my only real option at this time.

I'm actually thinking it might be reasonable to come up with a real estate syndication to pool some large investors, everyone kick in 1/2 Million or so, then build a 10 acre complex and professionally manage it.
 

taurus66

New member
To be honest , i don't know about the US Market, but in the uk , yes i think it is a good time to be investing in property. Prices are depressed, there are some good deals to be had.
Hopefully by year end i will be in a better position to be buying a second property, work will definitely be more and so too will be looking for new equipment too.
 

tommu56

Bronze Member
GOLD Site Supporter
This is a timely post my wife was thinking of buying a rental place on the outer banks of NC.
We go for a week every year with our extended family.
And though about buying and renting it out we just started looking to and called a couple property management co's down there to to see what the scoop is they are getting back to us next week.

tom
 

grizzer

New member
I'd suggest multi unit say 18-40 to make any money. Less units are a bear on maint labor. Prices last year were $25K/unit on distressed, now are $60K/unit 2-1 rents are ~ $700-900 mo on about 1K sf ea.
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
griz, my goal was to find about 25 to 35 units. So your suggestion of 18-40 is right where I'm looking. I looked mid-last year, found 2 8-unit building within a block of each other, tried buying both but both deals fell apart. It would have put me at 50% of what I was hoping for. Honestly I'd like multiple buildings, at 8 units each, on adjacent but separate lots. That way if I ever want to sell out I could sell all, or in part. For example sell off 1 building to pay for college, keep 3 more for income. Or something similar.
 

grizzer

New member
To get a cash cow much over 8% Senior assisted living with subsidized construction, or if you can hustle student housing will do it.

Selling off the smaller chunks might be problemmatic with labor distributed over less income (units) and the buyer wanting you to carry paper to make the sale.
 

FrancSevin

Proudly Deplorable
GOLD Site Supporter
All of those folks losing their super mortgaged homes have moved to the apartments where thay likely belonged in the first place. In 2006 many apartment complexes were going CONDO just to try and fill vacant buildings. Sold a lot of bad paper for Fannie and Fred.

Now, almost any residential construction is for apartment complexes and rental units. Because there is a huge shortage of them available. Seems most of the existing units are full up.

You guys likely missed the leading edge on that market.

On the other hand, most single family dwellings are depressed in price. And, at far below replacement costs. For investment profit perhaps sticking your finger to the wind and being prepared to act quickly on some single family units will put more in your pockets.

My kids are closing on a $300,000 plus property in Connecticut that is under water by 40%. 1.5 acres, two car attached garage, 5 bedrooms and a Mother-in-law suite for $200K. His family's physical impairments, along with his own, meant that he had specific needs so this was a rare find yes.
But,,,,
In his search he found perhaps hundreds of 30, 40, 50 cents on the dollar deals. The number of people who will now never qualify for a mortage is staggering,,,,and sadly, still growing. Lots of new rental prospects when they, once again, get a job. Rent to own is a big draw for thesefolks.

And soon,the time to snap such bargains up will pass.

There are many new subdivisions in our area that are now re-marketed as "rental" homes, not as homes for sale. Mostly town home and duplex construction, high density developements. In Vegas, they had so many of these they simply dozed some over. I doubt there are many "bargains" on high density apartment complexes but this concept might yet be fertile ground.
 
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