Nevada City Virtual Tour

Monday, May 6, 2013

Forget Buying A Single-Family Home - Purchase a

Forget Buying A Single-Family Home:
Purchase an Apartment Complex
 
 
 
Real estate investors are kicking single-family homes to the curb in today's housing market to purchase apartment complexes in areas with low vacancy rates.
 
The demand for rental properties is on the rise with the housing bust, economic recovery, high mortgage requirements and a constrained supply of newly constructed apartments.
 
You have record high occupancy for rentals and new construction is starting to take place, so therefore we have more people looking for apartments.
 
Multifamily investing is growing and in its fourth year of expansion because of the current economy and demographics.
 
Hedge funds are buying up foreclosed single-family residential homes and squeezing out single-family investors and first-time home buyers.
 
"We're seeing an uptick in these types of people - usually it's for [buying] a five- to ten-unit complex," Tippner said about investors who are switching from single-family home investments to multifamily ones for higher returns and increased cash flow. "It's just a start to get their feet wet."
 
A lot of people start with a four- to eight-unit and work their way up.
 
California has the highest trade volume in the country and represents a good percentage business in multifamily lending.
 
"San Francisco is going crazy," he said. "The potential income is high. There is Silicon Valley with a lot of people with cash and disposable income and they're trading in cash."
The requirements for multifamily loans are based on the cost of the property. Most loans under $3 million typically require a a personal guarantor, but commercial loans with a pool of investors on a property costing over $3 million are treated differently.
 
Higher mortgage requirements make it more difficult for individuals not in full-time employment to qualify for a mortgage - as in the purchase of a single family home.
 
It's definitely a different ballgame than the single family home, for lenders, they do look at the investor, but primarily they evaluate the investment on the cash flow of the apartment.
 
It's more work to buy an apartment, but the returns are greater.  If you want scale, it's an apartment complex. It's the equivalent of buying 100 homes at once.

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