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A Great Time to Buy a Duplex, Triplex, or Fourplex

As a real estate professional, you might expect me to say, “It’s a great time to buy real estate.” You could think I am biased, and I may be.

Right now there are two factors that provide a unique opportunity to invest in duplex, triplex, and fourplex properties.

Interest Rates and Financing

Banks consider 2-4 unit properties as residential properties. This means they are qualify for Freddie Mac and Fannie Mae underwriting guidelines.

You can get a great interest rate on these properties. The rates are going to be 0.5% to 1.0% higher than owner-occupied rates. Right now this means that borrowers with good credit and verifiable income can get an interest rate in the 4.25-4.85% range fixed for 30 years.

Historically rates have been much higher. You can see from the chart below that the historical average since the 1970’s is around 8.4%.

Freddie Mac 30Yr Mtg Rate Chart

 

Underwriting this type of loan is straightforward. For more information on financing these purchases read my article on Financing a Duplex, Triplex or Fourplex.

Borrowers will generally need 25% to 30% of the acquisition price as a down payment to finance the purchase.

If you are considering real estate investing, now is a good time to get off of the sidelines and to invest in well located real estate. Call me today to discuss properties that are currently available on the market at (925) 385-8798.

Walnut Creek Duplex Properties

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Oakland Investment Properties

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What it Costs to Have a Vacant Rental

A dilapidated and vacant house

A dilapidated house. Taken by Nicholas A. Tonelli *

I recently heard two stories about investment property owners that left their property vacant for an extended period of time. Investors refer to the lack of income from a property as Lost Rent.

One landlord owned a rental home in Concord, California. The home had been sitting vacant while the owner was determining what to do with it. The owner let it remain vacant for a period of 20 months. The house would rent for $2,200 per month. Over that period of time the owner’s lost rent was almost $44,000. This doesn’t include the costs that the owner paid for property taxes, insurance, and the like.

I heard from another real estate broker about a property that he was going to list. The property had sat vacant for 10 years. The broker estimated that the owner’s lost rent was over $250,000 over that 10 year period. This doesn’t include the HOA fees, taxes, and insurance costs of maintaining a property.

Apparently both of these owners had the means to make the payments and could cover the costs without the income from the properties. But realizing that the lost income could have generated a return for the investor can’t feel good.

Vacant buildings are likely to suffer greater wear and tear if left vacant. With no occupant to see leaks, notice pests, or dissuade vandalism, vacant homes are more likely to suffer rapid deterioration.

The moral of the story: A vacant property has huge opportunity costs in lost rent to the owner as is more likely to deteriorate.

*Photo Credit: Nicholas A. Tonelli used by Creative Commons License 2.0

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“Good Deals” are Harder to Find

One of the old adages in real estate is “You make your money when you buy, not when you sell.” Meaning that the acquisition price of a property is just as important as the sales price. Most investors know this and seek to obtain the best price when they buy as possible.

What is an investor to do when getting a good deal is hard to find?

WSJ.com is detailing the difficulty that smaller investors are having with finding properties to invest in. Much of this is driven by large investors that have continued to poor institutional funds into commercial real estate.

This is forcing smaller investors to go after properties that need more significant repair and turn around.

Another trend in the market is competition over the few properties that are available for sale. Commercial Investment Real Estate magazine, details the struggle that buyers are having over multi-family properties. Competition from buyers over the few properties available has caused prices to rise benefiting the sellers at the expense of the buyers.

Selling Investment Real Estate

If you are looking to sell investment real estate, this would appear to be a good time. The combination of low interest rates and strong investor demand puts you in a good position to reap a maximum value for your current investment.

The downside is that you might not be able to find a suitable replacement property if you are going to attempt a 1031 exchange.

Buying Investment Real Estate

If you are looking to buy investment real estate, you will have to be looking for the diamond in the rough or adjust your return requirements down. Properties that require good management and creativity can provide strong investment returns given a long-term investment horizon.

Feel free to call with any of your investing questions or for assistance at 925.385.8798.

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Good News for West Oakland

West Oakland is slowly overcoming negativity. Its proximity to the economic activity in Emeryville, Oakland, and San Francisco have given rise to its popularity. The West Oakland BART station is only 10 minutes from the Embarcadero Station in San Francisco’s bustling financial district. This allows West Oakland to be “closer to downtown San Francisco” than many parts of San Francisco itself.

One of the downsides for the residents of West Oakland has been [Read more…]

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2014 World Series & Real Estate Investing

Madison Bumgarner pitcher.

Madison Bumgarner “MadBum” 2014 World Series MVP

As you may have heard, the San Francisco Giants won the 2014 World Series in a thrilling Game 7 defeating the Kansas City Royals. What is interesting about the win is that it was built upon skillful pitching and base hits. The Giants did not hit any home runs in Game 7 and had only one double in the deciding game.

What does this have to do with real estate?

Base Hits Matter

The Giants won because they were able to get base hits. They were able to get men on base and put them into scoring position. Base hits allowed the runners to slowly advance around the bases and eventually get to home plate to score runs.

In real estate everyone likes to go for the big score. The home run deal that serves up 10%, 15%, or more in return.

However, sometimes it is the smaller deals, the singles and doubles that end up winning the game.

It is the small portfolio of single family homes acquired over 20-30 years that provide the income and wealth that transfer on to the next generation. It is the small acquisitions made with discipline and prudence that provide for the life and retirement you have only imagined.

A Lifetime of Singles

I met an investor who was purchasing his 8th house. I asked him about it. He said, “It took me a lifetime to accomplish it.” And yet, his 8th property acquired in a good area is worth in excess of $400,000. If all of his properties are worth about the same, he has a portfolio of close to $3,200,000. That isn’t too shabby for a lifetime of work.

To have saved $3,200,000 via the stock market he would have needed to deposit $13,260 per year earning an average of 12% per year over a 30 year time period. If that represents 10% of his savings, he would have needed to average an income of $132,600 over that 30 years.

Ready to get started in real estate? Give me a call at 925.385.8798.

Photo Credit: DSC_4813 by wong1982428 used by creative commons license

Company Profile

Welcome to Maclennan Investment Group, Inc., your East Bay Area real estate investment advisors. Maclennan Investment Group assists buyers and sellers of real estate maximize the investment potential of their real estate assets. Learn More about us.

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925.385.8798

Maclennan Investment Group, Inc.
3380 Vincent Rd, Ste HUB
Pleasant Hill, CA 94523
p. (925) 385-8798
Licensed Broker in the State of California, DRE#01871809
Equal Housing Opportunity
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