How can we be certain that house prices are going to crash? If they do, how much will they crash? Then, how will multi family be affected compared to single family? If people start defaulting on their mortgages due to COVID, would we not expect rentals to increase in demand?
Deal looks fine to me.
But if you had to bet, would you think housing prices well be more or less in six months?
Are evictions and delinquent rent payments going to be higher or lower in six months?
I would wait a bit. No need to hurry.
Less, but I also am not one to say I can time the market. The analysis is based on cashflow. The equity capture is an added bonus, but not guaranteed.
Hard to tear this apart. Solid case study, looks like a solid place on paper.
I think taxes seem high. 7200 annual for a 250k purchase? Is that on par with the area or can you have those adjusted down after a purchase?
Any additional local laws associated with multi family like this? In our metro area, 3+ units have to pull permits for commercial, not residential, making any changes much more expensive.
It sounds like you’re knowledgeable on section 8. I don’t have any of those properties, but they seem like a fair way to go as long as you can stay in compliance.
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Yes, taxes are very high in my area. And there are more social safety net programs as well.
IMO, yes. I'd wait to see how things shake out a bit. If the town is doing poorly enough, even section 8 tenants will move away.
I personally think there is a decent chance of screaming deals out there in the next few years because of Covid19 (I hope I'm wrong). This isn't terrible, but it's not a screaming deal either - and I'd say your vacancy (2.3%?) and capex/maintenance numbers are way low.
-W
The vacancy rate is based on 1 unit being vacant per year. This matches the performance of my other 4-family located 1 mile away, over a 3 year period. The CapEx budget also matches over the same history, assuming I put some money into short term repairs.
I would say this is a decent deal, but the prospect of getting up to $40k in repair costs paid for by the town is what makes it a good deal. My area is very difficult to find multi family at numbers that work. There are people (still, even with COVID) paying $220k for duplexes, in not so good sections of town. I have sent thousands of letters and looked at many properties. This would be a tough one to pass up.
If house prices do crash (and the stock market does as well), but this property still produces a 17% CoC return, isn't that pretty good?