Buying land and building the multifamily residence???

[Ryan Marble]

I live in a small town in eastern Arizona, about 7000 people, and we have a pretty serious shortage of rental properties. Finding multi unit properties for sale is almost unheard of. Just wondering, if buying a lot and building a duplex, triplex, or quad plex is a good option in today's market? I would not be living in any of the units as I already have primary residence in town. Any thoughts or questions? I'm still quite new to real estate investing and i'm looking for ways to get started in my own town.

[Marcus Auerbach]

Yes and no. Short term it is difficult to make the numbers work, the cost of new construction and the time it takes to zone-plan-build are usually the main reasons why private investors stay clear. I looked into this at more than one occasion, because Milwaukee has such an old housing stock, everything is 60-120 years old.

Most of the new apartments we see are 4 and 5 star developments with very high rents, this allows to offset the high cost of construction a little better. If you can get land for a good price and let's say build a modern quad with 1200 sqft 2 bed 2 bath units and garages for $200/sqft you are looking at about a million. If you can rent 3 units for $2,000 you are close to breakeven.

On the plus side, you will have a highly attractive asset and several decades without much cost of capex and repairs. Inflation will push up rents over time, so at some point you will be cash flow positive.