Follow the leader become trouble?

[Will Barnard]

The recent fad appears to be multi family investing. Everyone, including publications, are talking about it and the gurus have been promoting it again. RE appreciation in many areas has taken off over the past 18 months and the end is not yet in site. Rents are up, vacancies down, and new builds at very low lows, thus creating a supply and demand issue. New build permits for apartments are on the dramatic rise

Commercial, apartment buildings in particular, really took a big hit in the last bubble and have yet to recover. Many owners are facing balloons with no means to refi due to new lender requirements, many of them upside down.

With that said, I will get to the point. My fear is that adding apartment holdings to the portfolio and following this trend may lead right into the next crash. With so many hedge funds and Wall Street getting into RE over the recent past, when the crash does come, these large firms with massive holdings will lower rent rates to stay occupied and keep returns coming to investors. This will inevitably push rent rates lower.

What are your thoughts on this BP Nation?

[Dawn Anastasi]

I like the idea of keeping some of my properties without leverage so that my entire portfolio doesn't have leverage. If I have a vacancy, I'm not running so tight such that it brings me down. If I have to lower rents across the board, I can do it safely. I've been able to aggressively acquire 10 properties over 2.5 years, most of those purchased in cash, and have had 4 vacant units at one time due to acquisition and didn't break a sweat. (Obviously that's not the norm, but you get my point.)

I like the single family homes because although there are more roofs, more water heaters and more furnaces, there are also more exit strategies. (Plus other benefits.)