All Forum Posts by: Jeremiah Kovarik

I have recently been looking locally at multi-family rental properties and the area where they are hot is expensive, to the point where cash flow appears to be between $50 and $150/month on initial investment not including repairs and updates. In neighboring towns (within 15 minutes) there is property that is much less expensive comparatively. These towns have a bad name for rentals and the property usually needs quite a bit more rehab work. Does anyone have similar situations where they are tempted by these neighboring towns to purchase dirt cheap and rehab? How did it work out for you? What didn't work?

Part two: The "hot" town has had quite a bit of growth from major rental complexes coming in. What do people look at for dynamics of a town to determine if the location is going to stay steady or if the newly developed apartment complexes will create a "renters market" and in turn decline rent? With such a low cash flow there isn't a lot of room for error, this concerns me.

Any help is appreciated!

Kind Regards,

Jeremiah

Regarding competition from new construction, we look at the numbers to make the determination. Numbers including new units per year, absorption, net migration flows, vacancy rates, and rents. If you're concerned about oversupply, look at the numbers!

Taylor,

Thank you for your response. Is this a simple internet search or do I need to find this information elsewhere? Forgive me for being so naive. I'm just trying to take in as much information as I can. I don't necessarily fear failure, but I do fear my wife! Have a great day and thanks again for the input.

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Originally posted by @Dennis M.:

Cash flow is the number one factor in my book . Who cares where it’s at ? If it’s 10 minutes or ten hours away ? Your not living there . You got appreciation on the brain . Which I admit would be nice but don’t bank on that . People over analyze this stuff to death . You need to be concerned with how soon you get your investment back and what kind of numbers the property is throwing off in cash flow .

Dennis,

Thank you for taking the time to respond to my question. I do like appreciation, however I think my main fear at this point is over-saturation of the rental market and figuring out how to analyze if the area is in fact over-saturated. With cash flow being so close to zero it wouldn't take much to have a bad investment. I do agree with you, the return needs to be fast for more investments to happen.

Thanks again for your insight, have a great day!

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Originally posted by @Chris Coleman:

@Jeremiah Kovarik

For multifamily, or any rentals, you ideally want to invest in major markets where people want to live and can pay the rent.

That means:

1. Population is growing in the city, as shown by the last three years data

2. Employment is growing in the city

3. There is ample diversity in employment, such that a downfall in any one company or industry can not take down the entire market

If people are moving into this city and have plenty of employment opportunities, then that’s a good start.

Next you want rental vacancies to be low, and rental rates to be steadily increasing. But not drastically overheated.

Chris,

This is exactly what I was looking for. Thank you for taking the time to guide me on this question! I'm assuming most of this information can be found with a simple internet search or by talking with my realtor. Have a wonderful day!

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Originally posted by @Russell Brazil:

Would you rather own an asset that a lot of people want to own, thus it being hot.....or would you rather buy an asset no one wants to own?

What do you think happens to the rents and price of the 2 different types of assets presented here?

Russell,

Thank you for your response. This is a good point and I will keep it in mind. Have a fantastic day!

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Originally posted by @Joe Villeneuve:

Cash flow.

Positive Cash Flow.

If the market where you want to buy doesn't support rentals...then don't buy there. This isn't rocket science. Investing in a market based on its proximity to you is like buying a car based on the color you like...as the number one factor. If the car doesn't run, it better look awfully good sitting in your driveway. You can use it as a landmark when the Uber driver comes to pick you up.

Joe,

Thank you for your insight. If you want to stick with the car analogy look at it this way. If I purchased an old beat up car, restore it, and keep it in a crappy neighborhood next to a bunch of other beat up vehicles, that doesn't make my restored car any less valuable. You can't exactly say that about real estate however, since comps are based off of your surroundings. As I'm typing this I think i'm partially answering my own question.

Thanks again, I see you respond a lot so I look forward to picking your brain further. Have a great day!

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Any help is appreciated!

Kind Regards,

Jeremiah

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All Forum Posts by: Jeremiah Kovarik

Jeremiah Kovarik has started 1 posts and replied 6 times.

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