New construction multifamily?

Question

Hey everyone what are your opinions on purchasing new construction multifamily units? I'm sure cash flow will be close to 0 but I also think in the long term the equity and rent growth will be great. What are your thoughts?

Ryan Kelly · Answer

@Robby Sanchez there are some new construction duplexes in Leander, but they also come at a steep price. When you buy new construction, the upside is low maintenance, but the downside is you have no ability to affect it’s value in the coming years, so you are at the mercy of the market for all equity gains. Any of these properties will be difficult to get positive cash flow on in the Austin metro without a significant down payment.

Jordan Moorhead · Answer

I wouldn't buy new construction because you can't add value and that's how I've made the majority of my money investing in real estate also

Wyatt Seidel · Answer

Hey Robby!

This is a great question, but also a very subjective question because it entirely depends on what your specific and personal real estate goals are.

If you are looking to capitalize on equity for large sums of money later, great! If you're looking for cashflow to add to your monthly passive income, maybe not so great. All depends on what your goals are. And I also agree with what everyone else has said so far as well.

The area needs to be hot and developing if you wanna see true rent increases and equity growth over time.  But, you being in Austin, I don't ever see that being an issue.

Hope this finds you well and blessings from Kansas City

Jordan Moorhead · Answer

@Robby Sanchez there are very, very few new construction within 45 minutes to an hour of Austin

Gerardo Jasso III · Answer

A prime location is what truly matters in a metropolitan area. Easy access to highways, medical centers, schools is the driving force for rent increase and decrease, just like Houston Multi-families, most of these new constructions will cashflow within the year as long as the location is pristine! Similar or not the function of the property will determine. Some clients have gone with the approach of leasing out one unit while using the other as STR for Air BNB since some are close to downtown and the medical center

Robby Sanchez · Answer

Yeah that's what I'm thinking. There's currently a bunch of multifamilies under construction in the area and austin tx has historically been a great place for growth. But if other new multifamilies pop up near it won't that drive the rents down if they're similar in Unit mix etc.?

Allan Smith · Answer

It would depend on the trending direction of the neighborhood. If it's a pop up property that will be nicer than surrounding, probably nothing special on growth/appreciation.

if the whole area is new and there is more new construction coming down the pipeline like a Publix, another subdivision and so on then yes you could take low cash flow and ride it out.

I generally prefer properties with at least 10% cash roi out of the gate unless the area is about to pop off.

New construction multifamily?

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