Best Multi family markets?

Question

hey guys. I've been ready to buy my first Multi Family. Landed on Scranton, PA due to location and price. Really looking deep in the market and working with an agent. But im worried the market isnt stable enough. Seems to be declining a little.  So i was wondering if you guys could suggest any good areas to invest in multifamilies on the east coast <4 hours from NYC.

My partner and I are still heavily considering Scranton becuase there are many cashflow positive multis but I figured Id ask if you guys think I should look a little farther from home for a better market. Im 2 1/2 hours from Scranton.

David Faulkner · Answer

At the risk of starting a holly war, CAP rate does NOT indicate profitability. You can make a fortune on a low CAP rate multifamily, and you can lose a fortune on a high CAP rate multifamily, and visa versa and all shades of grey in between. Riddle me this, how do the thousands of high net worth investors consistently make their large fortunes even larger over decades investing in low CAP rate multifamily markets? Are they just really lucky? I submit to you that it is not all luck for all of them. If you keep an open mind and study how this is so, then you will better understand my comments and be able to either pick a market based on your preferred strategy and preferred risk/return profile, or better yet, adapt your strategy for what works in your local market and continue to evolve it as you and your local market evolves. There are no bad Real Estate Markets, only bad Real Estate Investors. Home court advantage matters a lot ... so my advise is to stay local, learn the many ways to profit from REI (hint: cash flow is just one small slice of the pie), and select the best investment tool for the job at hand. Good luck!

Account Closed · Answer

Interesting. Please elaborate more, Noman.

Marie Roberts · Answer

I just started. Right now I am trying hard to find a contractor to go with my rehab loan ... I primarily got my license to get into houses faster do I don't miss out on a deal. I may need to look into selling a house etc. For someone else so I can pay off the fees I had to pay. @Michael Gansberg

Michael Gansberg · Answer

Hi @Marie Roberts, sorry for the delay, I just noticed your post. To link names, type "@" and the first few letters of the person to whom you're responding, then their name will typically pop up, and click it.

My turnover in Troy varies with the neighborhood- in the desirable areas(as a real estate broker, I can't really say what or where a desirable area is,) I can't even calculate turnover, as some residents have kept their apartments since I completed the buy/rehab process- sometimes in excess of 5 or 6 years. In the less desirable areas or in my lower-quality apartments, turnover is much more rapid. Portfolio wide in Troy, I estimate my average resident stays for three years. But as many a mathematician has noted, when you're crossing a river and are unable to swim, you don't care about the average depth of the river, you just care about the maximum depth!

In this context, that means that average turnover is nice to know, but what I really care about is whether or not I can weather the storm of a sudden spike in turnover rate- such as can happen after an 11 unit building becomes infested with bedbugs, for instance. Sometimes I'll go months with nary a vacancy, and then, BOOM! 5 tenants jump.

How are you enjoying the realty biz in Albany/Troy? I have to admit, I just can't get enough. And shh...don't tell anyone, but I can't wait for Sundays to end and for Mondays to start.

Michael

Noman Tariq · Answer

okay so once you have the net operating income and you divide that by the total purchase price and net operating income buy total cash out to close the deal... What are those two ratios called? These are two of the many calculations that I use for comparison purposes and in my opinion I believe these are the best because they give me my true rate of return...though  well I can potentially be wrong.

Account Closed · Answer

Norman, no one is going to buy from you if you don't even know the definition of cap rate.  You ONLY subtract OPERATING EXPENSES to get NOI.  Financing has NOTHING to do with cap rate.

Noman Tariq · Answer

i currently have 5538 elliot st listed at 52,000 tenant ready vacant waiting for investor to choose their tenant, 950 is avg rent in the area. after accounting for pm, vacancies, maintenace licenses etc etc, my prop will still give the investor 13% cap rate

Noman Tariq · Answer

actually ill enlighten these guys also, cap rate =( income minus expenses ) / purchase price.

If you buy cash you are no longer paying a mortgage, therefore reducing your expenses, and increasing your cap rate.

Noman Tariq · Answer

i guess same post forum the other forum, so please refer to the response on there

Account Closed · Answer

Norman, sounds like a scam.  How does a cash del affect cap rate?

Best Multi family markets?

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