Atlanta, GA · Member since 2017 · 70 posts · 16 votes
Is it wise to invest in a LURA restricted Multifamily?
It has 3 years left on LURA.
On a busy street, but the rents still seem on the low side and not even up to what the Lura restricted rents are.
Currently operates at around 6% cap, some degree of remodelling has already been done so not sure if there is any immediate upside value add deal in this.
Think need to verify why the rents are still this low, and only play in this is to resell it when close to Lura expiring and the fact that rents can be raised to market?
It may take a while to slowly have previous tenants leave after lura expires and then fill with new tenants; but with Lura tentnats in there, will there be difficulty attracting new tenants?
Buying an expiring LURA deal can be a great play, but you have to know what you are doing.
While the LURA is in effect you can bring rents up to the allowable limit if the market supports it.
My guess is that the LURA doesn’t expire in three years, but instead becomes eligible for the qualified contract process. You’ll want to hire a consultant to help you through that so be sure to budget for it.
Once approved for the qualified contract you enter a three year decontrol period. During this period you can rent to market-rate tenants with no rent restrictions, but you cannot evict any income-restricted tenants...your rollover to market rate has to happen through attrition.
During this period it can a bit more challenging to attract market rate folks in some cases.
So for this property it’s a 6-7 year process. But there is certainly a bump in resale value the closer you get to that 6-year mark.