What is going on with this market?

[Alan Zee]

I am not sure what to make of this real estate market in 2019. The prices are out of control for lousy multi families. These properties don’t cash flow unless you buy with 50% deposit.

With 30% down, you’re just breaking even. I’m talking C&D properties in C&D areas.

In Cincinnati where I invest, a 4plex a year ago was listed for $35k- 40k door. Now they are listed for $50k plus/door. Rents remain the same.

In NJ where I’m also looking. Prices are 20-30% higher than a year ago. The lack of supply are causing owners to ask sky high prices for fixer uppers.

This trend has continued for the last few years but the last 12-18 months it seems really out of control.

Im interested to hear the opinion of other investors here on the current market? It seems everyone is chasing “ doors” without calculating the numbers in my opinion.

[Chris Martin]

Originally posted by @Alan Zee:

I am not sure what to make of this real estate market in 2019. The prices are out of control for lousy multi families. These properties don’t cash flow unless you buy with 50% deposit.

With 30% down, you’re just breaking even. I’m talking C&D properties in C&D areas.

In Cincinnati where I invest, a 4plex a year ago was listed for $35k- 40k door. Now they are listed for $50k plus/door. Rents remain the same.

In NJ where I’m also looking. Prices are 20-30% higher than a year ago. The lack of supply are causing owners to ask sky high prices for fixer uppers.

This trend has continued for the last few years but the last 12-18 months it seems really out of control.

Im interested to hear the opinion of other investors here on the current market? It seems everyone is chasing “ doors” without calculating the numbers in my opinion.

The first step in your analysis should be who is doing the buying? In my area (Raleigh NC historically), the hedge funds stopped buying a few years ago. The SFR buyers of NOO (Non-Owner Occupied) property tend (depending on the area/neighborhood) to be not local. For apartments, I see LLCs from all over, but that's the way it's always been where I am. 

Pick a few recent buyers in your "space" from public records and drill down. Are they first timers? What bank financed them or did they buy w/o leverage? Is the purchase a 'turn-key', a value add play, straight retail, ? Who brokered the deal? Was this the result of a flip or value add play? 

As you start getting answers, you may see a picture developing that brings clarity to your market, OR may provide insight that you maybe didn't expect. 

I've been on the sidelines for a while since I see the same phenomenon. But deals still close, so it helps (me at least) to understand who is doing the buying.