HCOL multi-family

[mustachioso]

Everything in my area is going for rent to mortgage break even point ex: gross rent is 7k so price is 1.4M making the monthly 7k w/ 20% down.

They're still flying off the shelves! Am I missing something? Can that many people really be gambling and hoping appreciation continues while you eat any repairs, vacancies, etc?

Is there some kind of tax benefit I'm missing beyond depreciation that might make this worthwhile? Even if you 'house hack' and live there you could probably find a comparable place to rent for less!

What am I missing!?

[salmp01]

I own lots of rental property and started buying in 2008 and stopped a few years ago.  In my opinion, now is not the time to invest in rental real estate in the area I live so it's probably similar to where you live so you're not missing anything.  I'm sure there are some areas that make sense to purchase multi families but at this point I'm not ready to purchase outside my comfort zone! 

[Another Reader]

Lots of overseas money that wants to move to a safe location and invests for the next generation.  The expectation is that rents and values will go up over time.  Also lots of local money with nowhere else to call home.  Take the tax deduction if available, the equity build up if the purchase is not cash, and hope for appreciation.

Or as I see it, too much cash out there with a short memory.

[ChpBstrd]

There's no other explanation. These are leveraged bets on real estate appreciation. When a 20-25% down payment is all you have to lose, lots of people will gamble on the chance to multiply the value of that down payment over the years.

What happens when mortgage rates return to 5-7%?