Why are all the small multifamily suddenly for sale?

Question

I've been looking to house hack since 2019 in East Texas.  Began by educating myself and joining a local REI. Then covid hit and everything kinda paused. I watched the local market all through 2020 and almost nothing came on market. Now within the last 10 days at least 15 small multifamily units have listed for sale. At least 3 appear to be selling their portfolio.  So now I'm gun shy. Are they just selling because the market is high and they're capturing appreciation or are they rats jumping off a sinking ship? I'm still new and a little stuck in annalisis paralysis but that's how I function.  If I have a tree to chop down in three hours I'll spend the first two sharpening my axe. I will buy realestate but I want to avoid the obvious blunders. What do you guys think?

Greg Scott · Answer

If you were in NY, CA, or one of the other states enacting anti-landlord laws, I would say investors are jumping ship. Since it looks like you are in TX, it is just investors taking profit. Nothing wrong with that. In fact, as an investor, if you do not do that from time to time, you are not optimizing your portfolio. Them selling is not a signal that there is something wrong.

Just do the math. If the property gives you a good return from cash flow, buy it.

Just do the math.  If the property gives you a good return from cash flow, buy it.

Joe Splitrock · Answer

I can't speak for your market, but in my city all the crap properties in the worst locations are being sold right now. High market prices are causing landlords to dump the junk. Real estate agents are telling everyone "now is the time to sell", mostly because prices have gone up so much but partly because they need listings, haha.

Kyle Parks · Answer

A random thought - if legislation is being drafted to hurt 1031 exchanges we may be seeing more of these come up for sale in the near future?

May be off base.

Nick Dunin · Answer

Morning Steve....I assume you're talking about that quads on Tammy Lynn Dr?  I was wondering the same thing.  The 6 four-units that just got listed are owned by someone that owns whataburgers in the area, and I was told he's trying to put more attention to that side of his business.

I was considering buying something there, but I want to focus more on brrrr.  Im also new to investing.

Jonathan Greene · Answer

There could be a lot of reasons for selling right now, but the most prevalent is capitalizing on a hot market and a billion potential house hackers. I don't think where you are there are any rats hopping off ships. In every market, landlords get annoyed at some point and just want to offload so when the market is hot it provides the perfect opportunity. As many said, it's the numbers that matter along with the upkeep.

Damaso Bautista · Answer

@Steve Pickenpaugh

This is the perfect post for all the ones complaining there are no deals to be found.

When someone says there are no deals, I personally think of the poster, if there was one sitting right in front of you would you buy it or are you just complaining to complain.

Your post validates my thoughts lol 😂

Darson Grantham · Answer

@Steve Pickenpaugh, I think based on your initial post... you know the answer, run your numbers, and if they make sense take action.  It is time to stop sharpening the Axe, as it is sharp enough!  That being said, just something simple like starting with calling your favorite local investor-friendly agent and see if they will give you the gossip and get a tour of the buildings with the most potential would be a great first step! Good luck and if you want to DM me for an "outsiders" "no dog in the fight" point of view please do so! Would love to give you some specific input/suggestions if I can get the down and dirty details!

Steve Pickenpaugh · Answer

@Greg Scott thanks for the reply. The numbers barely work but what concerns me is the $510 rent in identical buildings at the end of the street. From what I've read it's very difficult to stay out of slumlord category and make needed repairs if you're only collecting $510 a unit? Median rents in this area are low $800 range.

Steve Pickenpaugh · Answer

@Nick Dunin good morning.  Yes, it seems everything on TammyLynn is up for sale? A million dollars worth of duplexes in addition to the quads. The selling prices aren't too bad but my issue is with rent. The other quads at the end of the street rent for $510. With plywood at $94 a sheet that puts them in slumlord territory if anything requires significant repairs? I in fact lived in a duplex around the corner on Nikki Dr several years ago so am well aware that you would have to basically buy up the entire block to "improve " the rents. Similar quads on Green st in Hallsville rent for $750, quite a difference.

I know restaurants took a pretty hard hit during the pandemic so makes sense if Whataburger guy needs some cash injection.

Rents seem to have held stable and have been paid inspite of moratoriums?

Why are all the small multifamily suddenly for sale?

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