When a MF unit stays on the market is that a red flag?

Question

Hello,

I've noticed two particular MF properties in the FT Worth area that have been on the market for approximately six to eight months.  One is a 4-plex, one is an 8-plex.  The 4-plex is listed for $189,900 and the 8-plex for ~$289,000.  When properties like this stay on the market without being snapped up by investors, should this be a red flag that there is more going on than meets the eye?  If these properties are both in C/D areas, is that an automatic red flag as well?  I thought that going into a C class property and rehabbing it to a B is one of the most common investing strategies.  So why are these still sitting there? (Sorry for the wonky formatting.)

Paul Timmins · Answer

@Ashley Wolfe

Google the property name and address see what pops up.

To find out about an areas go to IREM.org search for ARM certified property managers. Call 5 ask them what they see expenses running per category per unit. What do they see them selling for per unit, what is the market occupancy rate. What are the market rents? Ask them if they know anything coming up for sale. Great way to pick up some good info and possibly a deal.

You can also search NARPM.org for the RMP (Residential Management Professional) and MPM (Master Property Manager) certified.

Paul

Robbie Reutzel · Answer

Hi Ashley,

I can only speak to the Eastern Massachusetts market but, particularly in and around Boston, there are typically two types of multi-family properties:  1) those that sell in 3 days over asking and; 2) those that sit for 6 months and eventually sell after the price drops.

Obviously the price is the most important thing but I agree with @Ryan Matthews that getting more information from an agent is the way to go.

Good luck!  I wish I could pick up an 8-plex for under $300K!!!!!!

Corey Melkonian · Answer

It could also be a limited amount of the buyer/investor pool out there looking for 4+ units. I'd consult with a good real estate agent in the area and ask many questions.

Jim Sestito · Answer

@Ashley Wolfe  The first renal property I acquired had been on the market for 180 days+

Being the new guy on the block this was my strategy - since no one was going to call me with off market deals I thought I could buy under value by getting a property that had just a little too much work for other investors.

Did it work out?  I would say yes.  Did it take a s--- ton of work to rehab?  Yes again... but I am looking to cash out refi now with over 80K in equity to put a down payment on the next one...

Good luck

Mike Wood · Answer

@Ashley Wolfe You mentioned C/D area, they mentioned upgrading the properties to from a C class to a B class.  You can NOT change the area, so regardless of how much money you pour into it, the area will be the same (unless you redevelop major blocks of the area, which is hard to due by yourself).

How long properties sit on the market is very dependent with your particular market conditions.  A local realtor could answer that.  Around me, the market is hot.  Duplex MF (2 units) have low inventory and selling fast. Units that stick around on the market are either over priced or they need way to much work for most people.  But that is my market.

Most people will warn you about C/D areas.  The tenant are generally worse and the property requires more management and upkeep in those areas.

Justin Repp · Answer

@Ashley Wolfe it is either because of location, condition, or price.  Or all of the above.

Mike Hurney · Answer

@Ashley Wolfe Overpriced.

Aramis Jordan · Answer

You need more info, I for one would be looking at those units closely. What does that mean, I would do rent research to see what the market is like per unit rent. I would check on crime, other properties in the area.

More importantly, go look at them and see what level of repairs each unit needs. I try to by units in my area for 50k or less all in, which means I will pay 60k for a two unit, knowing that I have 40 k to play. At 50k per door, and 2-3 bedrooms I can make numbers work nicely.

Anything above that it gets tight since the market rents can only be so high.......

Ashley Wolfe · Answer

Great advice, thanks!

Ryan Matthews · Answer

Assuming these are not overpriced then I would check with a knowledgeable real estate agent who may be able to provide you with information on the property such as building history (crime / drugs in the units) or possible existing liens / back taxes owed. Or that part of town is just somewhere no one wants to go (ie. certain parts of Detroit).

When a MF unit stays on the market is that a red flag?

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