Cash Flow Vs Appreciation
I came across a 1926 brick building (28 units) that cash flows pretty good, but is in an area where the appreciation is almost nill. The property in a low income, blue collar area and the rents are about $325 for a studio. Easy to rent out as it is close to industries.
Though I think it could be a good investment, but am a little confused as there might not be any appreciation. What should I be looking for when it comes to multi family properties. Is cash-flow in itself good enough to move forward or should I also look for appreciation.
Commercial gurus, please advise.
My experience is unless the area is going down, there definitly will be some appreciation. Normally an appreciation of 2 to 3% will happen no matter waht. Becasue the prices of building apartments will go up substantially due to incresed gas prices. Secondly if you renovate it , obviously you can charg higher rent, and the price being multiplier of the rent the price will go up too. But most important thing is to have acash flow available to keep on fixing and also a reserve for unexpected situation
his lack of honesty and professionalism, in my opinion, would warrent a complaint. I hate to say that about another licensee but the truth is the truth. He needs to get his act together or switch to a new industry.
Good luck
Call a couple of property managers to find out what kind of vacanies you can expect. Most important thing is to check for prior evictions.
My experience is two ways. While single family seem easy to rent, due to higher rent there are less no. of taker . Also when it is empty you have to worry about vendalism more and there is Zero income. But you have better appreciation.
With four plex you hardly have a time when it is 100% vacant hence you always have some money coming. since some tenants are there chances for outside vendalism are less, you normally have better cash flow then appreciation.
Regarding insurance, you can get it from the same people who is giving you insurance for your house or even automobile.
For bad tenant you need to give tenant a notice period based on the lease and if he does not vacate have to get court order for eviction. You can look through yellow pages for eviction legalproceedings and physical eviction agents.
You want also to take a blanket personal liability insurance at the cost of approx. $300.00 /yr. for 1M, to protect yourself for personal liability, your insurance broker will get you this insurance too.
The major difference betwinsfh & mf is that insfh you are dealing with one tenant, in mf you are dealing with many who can gang against you if they theink that you are unfair to them.
Hope this helps you. Good luck
Furthermore, I did not post a link as another moderator said. I referenced the web site for the national trust for historic preservation, which does not sell props.
I am an investor, new to the commercial side, and my questions are being unfairly targeted for deletion.
Big Al
Chet,
I am thinking it is Chet, sounds like you have been there.
John $Cash$ Locke
[addsig]
One important thing you want to consider is ability to sell. Most low income area people are what they are , low income. hence they do not have enough money for down payment and hence there tend to be lesser owner occupant. majority buyers are investor who do not pay as good a price as an owner occupant. becasue of the same reason, the process is slow and time consuming for a complete sale.
i assume you are familiar with need for legal work for legal description of individual condo and common areas,forming condo charter,and association, registering, developing operational rules, procedures for electing board of directors, yearly maintenance budget, having different utility meters or formulating of maintenance of common area, and marketing .
Other important factor is taxes. As soon as you divide the complex in individual units, obviously each unit will have higher assessment then as an apartment. and will have higher taxes, which you will be paying until you sell the condominiums.
secondly you will be required to share information about the maintenance cost with other owenrs who will be part of the association.
Once you sell sufficient condos, as a group, they may control the decision process instead of you.
You can form a management company and sell management services to the condo association until the association is farly active and choose other managers.
I hope these comments are useful to you. Good luck
As a general rule one bedroom condos do not sell well. Your market may be an exception, of course.