Want to invest in multi family apartment building (5+ units)

[Harpreet Singh]

Hi, I'm new to commercial real estate investment. Is this good time to invest in multi family apartment building with 5 units or more? According to real estate 4 quadrants: 1. Recovery 2. Expansion 3. Hyper supply 4. Recession Which quarter are we in August 2018? I'm looking NJ, NY and PA areas to invest. Thank you, Harry

[Brian Burke]

I hate to be the odd man out, but I must disagree with my esteemed colleagues.  It isn't always a good time to buy.  There are times where you should just play golf or sit on the beach.  Ask anyone that bought single-family homes in California in 2005.  Or worse, any dirt in 2005.  Well I am one of those people, so since you asked...I bought some of both, a rental house, a 4-plex and 16 acres of subdivision land in 2005.  Thirteen years later the real estate is barely back to what it was worth back then and it was massively negative on cash flow (mostly the land).  I've taken nearly $1 million out of my own pocket for these properties since buying them just to hang onto them.  I might get that back.  And might not.

I'm just glad that I somewhat saw the writing on the wall and slowed down my buying from a couple dozen properties a year up to 2003 down to around 4 or so in 2005-2007.  Had I thought that it was always a good time to buy and kept up my previous pace I probably would have been wiped out.

That said, I don't think that today is 2005.  There could be a recession in our future but I don't predict that it will be anything like what we saw back then.  If the great financial collapse gave you a near-fatal head injury, the next adverse cycle might give you a sprained ankle.  Wear a helmet and knee pads and you'll survive the fall.  That means underwrite conservatively with margins for safety and don't over-leverage and you'll be fine.