Unique situation I am in, possibly buying my landlords triplex in Belmont Heights

[Maddison Martin]

Hello!

A lot of these blogs I am reading are from out of state with very low cost of living so I think If someone from this area could answer this, it would be very helpful for me.

So my husband and I are currently living in one unit for the past 4 years that is part of a triplex/multifamily property in Belmont Heights in Long Beach, Ca. It is a very high cost of living and my landlord has been renting out the triplex for a little below market value for the past few years, however he is going to be selling the property ( all three units)

  (This area is considered very nice and "shouldn't" depreciate in value. )

I have been trying to deep dive into bigger pockets, reading bigger pocket books, watching videos but  a lot of the resources talk about multi-family properties as purely renting out all units and not actually living in one of the units.  I feel like all the calculations ( ex 4 square method analysis) and cash flow are going to be not reflective of out current situation since we will be living in one unit and renting the other two units. This is causing difficulty for me to understand if this is a good investment property or not when I do an analysis on this property.

We are getting a huge downpayment from our parents for a house. 

When I do the 4 square method just basing it on the other 2 rental incomes we have negative cash on cash return and negative Cash on cash ROI. We would be paying more monthly i we bought the place than we would be if we were just purely renting. However we would be "getting more house" ( access to a second back yard, tool shed, driveway, second storage unit, etc)

When I look at other houses in the area, with the intrest rates as they are, I don't understand why anyone would buy multifamily and rent it out when all of these calculations would be negative cash flow.

Is it just based on property appreciation alone and the hopes of mortgage percentages eventually lowering and slowly increasing rents?

If someone could help me understand or your thoughts would be great.

[Jason Kudo]

Quote from @Maddison Martin:

Hello!

A lot of these blogs I am reading are from out of state with very low cost of living so I think If someone from this area could answer this, it would be very helpful for me.

So my husband and I are currently living in one unit for the past 4 years that is part of a triplex/multifamily property in Belmont Heights in Long Beach, Ca. It is a very high cost of living and my landlord has been renting out the triplex for a little below market value for the past few years, however he is going to be selling the property ( all three units)

  (This area is considered very nice and "shouldn't" depreciate in value. )

I have been trying to deep dive into bigger pockets, reading bigger pocket books, watching videos but  a lot of the resources talk about multi-family properties as purely renting out all units and not actually living in one of the units.  I feel like all the calculations ( ex 4 square method analysis) and cash flow are going to be not reflective of out current situation since we will be living in one unit and renting the other two units. This is causing difficulty for me to understand if this is a good investment property or not when I do an analysis on this property.

We are getting a huge downpayment from our parents for a house. 

When I do the 4 square method just basing it on the other 2 rental incomes we have negative cash on cash return and negative Cash on cash ROI. We would be paying more monthly i we bought the place than we would be if we were just purely renting. However we would be "getting more house" ( access to a second back yard, tool shed, driveway, second storage unit, etc)

When I look at other houses in the area, with the intrest rates as they are, I don't understand why anyone would buy multifamily and rent it out when all of these calculations would be negative cash flow.

Is it just based on property appreciation alone and the hopes of mortgage percentages eventually lowering and slowly increasing rents?

If someone could help me understand or your thoughts would be great.

 Whether buying this subject triplex is a good investment will depend on what your goal is with buying real estate and what your definition of a good investment is. Not all investors share the same goal.

If it's strictly positive cash flow, you're going to have a tough time meeting that goal while living in one of the units these days in Belmont Shore.

Under the current economic decisions, if you're going to live in one of the units, a more realistic goal might be to subsidize your mortgage with the other two incomes to bring your mortgage payment down, build equity, ride the market appreciation, force some appreciation of your own, refinance when rates are in your favor to crush the mortgage payment down, and keep positive cash flow for a long-term goal.

Belmont Shore is a nice area where homes hold their value well and enjoy good appreciation as well as strong rents and in general, the type of renters landlords are looking for.

Belmont Shore is also a good area for short-term rentals and you may want to consider renting one unit as an LTR and the other as an STR.

Ultimately, your situation is going to dictate whether this triplex is a good investment for you and your husband but as a Long Beach resident, I know that Belmont Shore is an area that people aspire to buy a home in.