How do the numbers make sense?

[Matthew Gentile]

As an agent, I have been seeing insane numbers being offered on properties where there is no way the rents can possibly make sense.

I'm curious how people are spending so much on multi-family properties, especially in the current rate environment. What is the mindset or strategy when the offers are out of range from the absolute top ranges of rent that could be charged? Is it a hope that rates decline and then it makes sense? But how much damage will be done by hoping for the unknown and operating at a loss? Will rates come down enough to make sense? Are we hoping for appreciation in these situations? There are still deals to be had and things may not make sense for a couple of years at best, but some of these numbers just do not add up. Would love to hear some perspective on this!

[Henry Clark]

Run the numbers.

1.  1031 exchange.

2.  Newby investor doesn’t factor in maintenance, capex, turn over costs, vacancy costs the same as another investor.  They are paying more to be educated.

3.  Interest rate- what does it take to make this a good deal.  If rates go from 8 to 6% what are the cash flow numbers?  How will the market and buying pressure revalue the house at 6%?

4. REI type- from rental to MTR, higher cash stream impact on valuation.

5.  Higher rent-  We have had 10 to ?? Million people added recently.  They can pay more at 4 to 8 occupants per rental unit.  That in turn drives up other units.

6.  Airbnb- house go off the market for housing.  Drives up housing rates.

Is there anything specific about your town and area market?  New industry coming in?  Resort town?  Etc. 

The math works for that buyer.  Just a different approach.