Multi Family Apartment in Hartford, CT

[Jesus Orbea]

Hello All,

I am considering investing in a 14 unit apartment building in Hartford, CT. I’m looking for advice on the Hartford market in general. Is this a place that is wise to invest in if I am looking for cashlow AND appreciation?

[Steve K.]

I grew up right there. My brother has some MF properties in the area, and so does my uncle and cousin. It's an interesting area, very block by block. For example you've got Trinity College right there, which is a good school. Just steps away from campus you've got Frog Hollow which is one of the worst hoods in the country (at least it was when I was growing up there in the 90's, although it has gotten a little better). If the building is somewhere Trinity kids or University of Hartford students would want to live it could be a good play. However if it's got locals living in it, different story and really depends on the street.

Appreciation has been pretty flat over the past several decades within Hartford, but in the past few years it has actually picked up a little bit and is at least keeping up with inflation now. Cash flow can be good if you manage well, and have affordable maintenance and repair people.

As far as the Hartford market in general goes, I'll give you a little background. A lot of people don't know this, but Hartford was once the place everybody wanted to be. This was in the late 19th century, when its factories cranked out guns (Colt, Gatling, Browning, Sharps), tools (Stanley), clothing, textiles, cars (Pope), bikes (Columbia) and all kinds of goods. It became the wealthiest city in the country for a while during and after the Civil War. It was also the center of publishing and an intellectual hub at this time (Mark Twain, Harriet Beecher Stowe, Frederick Law Olmsted, Wallace Stevens). This made it a great place to be. Historians call it the "Silicon Valley of the 19th Century". Many advancements in manufacturing technology were made there, the city was flush with startup capital, and it became a magnet for the brightest minds who wanted to be on the cutting edge.

Hartford has been circling the drain ever since then. Today, the macro economics/demographics are not what most investors are looking for. Don't get me wrong, people are definitely investing there successfully, but as far as comparing it to other markets goes, it doesn't perform very well with the metrics most people are looking for: growth market with a strong economy, diverse job market, affordability (residents make enough to be able to buy property, which drives property values up), good schools and an increasing population. Sadly, Hartford is the opposite of all that as it has been in post-industrial terminal decline for a long time, without much hope of real change coming anytime soon.

Pros:

Favorable price to rent ratios.

Low barrier to entry/Property values are low compared to other markets.

Rents are skewed high because many renters have subsidized housing vouchers/Section 8.

High percentage of the population is made up of renters (Good rental market).

Cons:

High property taxes!! (and rapidly getting higher).

Rough tenant base.

Aging stock: buildings date back to the 1700's, many have deferred maintenance or are approaching physical obsolescence.

Declining population.

High crime: pretty sketchy by most people's standards, consistently ranks top 10 worst US cities for crime.

High poverty rate/High unemployment (Section 8 is a must)

Tenant-friendly laws (3-6 months on average for a simple eviction, $3-5k not including lost rent).

Corrupt/Jacked-up/inefficient local government. The city almost went bankrupt a few years ago, but was bailed out by the state last minute. Politics are kind of a mess. Every few years a new mayor is elected who promises to revive the city, but they usually end up in jail for something instead. 

 I'd actually recommend avoiding Hartford altogether. East Hartford, Middletown, Manchester and New Britain are better markets if you must invest in the area. New Britain is also very block by block though, so it's important to be careful and really know the area well. Make sure you have good management, a guy for evictions, and know that there are parts of town where it will be difficult to impossible to get anyone to manage your property (North End).