Consider multiple units as investments

Consider multiple units as investments
Date Published: April 24, 2014

Dear Sue,
My uncle died and left me a $150,000 inheritance.
My plan is to use the money as a down payment on a house and get a loan for the balance. My lender said that I qualify for a purchase price of $300,000 tops.
I am not having much luck finding a house in this price range that doesn’t need a lot of work and I don’t have the extra money.
My agent told me that investors swooped in and bought all of the best houses at the best prices.
She said that it's getting harder for a single family residence to pencil out.
Have you found this to be true? Do you have any suggestions?
~ Investor Ivan

Dear Ivan,
Your agent is right. Investors dominated the market for the last several years. One private equity firm bought 10,000 homes in the Sacramento region alone. The investor buying spree drove home prices up making them less desirable as rentals.
It has gotten more difficult to make single family homes pencil out as rentals.
In my opinion there are other investment opportunities that are being overlooked. Opportunities that may not appreciate as rapidly as single family homes but promise good cash flow.
For example I ran across a two bedroom ground floor condo for $85,000. If one paid cash and rented it for $1,000 per month and paid an association fee of $250 per month and taxes of $80 per month, one could enjoy a very nice nine percent rate of return. Not bad.
I saw a one acre parcel with multiple homes for $289,000. It has rents of $2,083 per month. If one were to make a down payment of $150,000 and get a 30 year loan for the balance at 5 percent interest the monthly payment would be $746, plus taxes and insurance in the amount of $350. for a total monthly payment of $1047.
The monthly cash flow on a $150,000 down payment would be $1036. That’s an eight percent return on a $150,000 cash investment.
These types of investment properties will soon be noticed by other investors in the market and will disappear. So don’t overlook them in your investment search.
Considering multiple units could be a matter of good Home $$$s and Sense.

Sue Thompson is the owner of HomeTown Realtors in Auburn. She can be reached at seesue@mac.com, or at www.homedollarsandsense.com.