One trend that we (agents/brokers) have been seeing since late 2011, is the strength of the multi-family segment of the property markets in the Boston metro and suburbs. I have thought for at least 5 years that the multi-family segment of the property market made a lot of fiscal sense for owner occupants to consider. Investors have always been interested in procuring 2 and 3-family properties for their “cash flow” potential (income from rents). It made sense and still does make sense for the investor.
However, investors are now seeing much more competition from buyers who are looking for 2 and 3-family homes. I have witnessed the broad strength from owner occupant minded buyers in Wakefield, Arlington, Medford, City of Boston, Somerville, Cambridge, and the list continues.
A new multi-family comes to market and there are very particular showing instructions that are geared toward “group showings” over several days and with a note from the listing agent on the property listing sheet that states “all offers, if any, due by 5pm on Monday (or Tuesday)”. The reason for the “group showings” is out of efficiency and practicality since many of these multis will have tenants in each unit. After the group showings are completed, all interested buyers may have a deadline to submit their offers for the property. You can expect, in most cases, multiple offer situations where the best and highest offer with the best financing and terms (closing dates, inspection terms) is accepted. It’s crowded in this situation. Be prepared.
At group showings, I have seen a wide and diverse array of buyers from all segments of society (ages, married/single, race, etc.). These buyers may have been focused on the purchase of a condo/townhome or single family home and are now honed in on the prospect of: 1) having cash flow from rents help them with the mortgage payment; 2) buying an asset with similar prices to single family and condo/townhomes on the market; 3) becoming landlords.
What happened that caused buyers from pursuing multi-family homes vs. condo or single family home ownership? I think there are several reasons: 1.) we are somewhere within the Great Recession right now and rental income to help alleviate mortgage costs is a huge allure; 2.) compare a $400,000 condo with 2 bedrooms vs. owning 2-3 units where you live in an “owner’s unit” which is comparable to that $400k condo, but you also own the entire property as well as and have an income stream from the other unit; 3.) the multi-family may be an investment with a return greater than a savings/money market account and no one trusts the stock market.
Can you understand the “why” that is lodged behind the interest to buy a multi-family home? I gave a few examples and there are others. However, have all of the buyers considered the costs of owning and running a two-family and have they considered the efforts required to be a good landlord? Perhaps it is like the parenting decision. Biologically, we have instincts to be a mother of father. Those same instincts are required and will help you to become a good landlord. That rental income that entices you to hunt for a suitable multi-family property does not magically appear on the first day of each month.
Becoming a good landlord is not easy. Perhaps it is not even one of your goals. Whatever your goal in becoming a landlord, you will have to find good, solid, reliable tenants and there are many of them to choose from. You can do this and find the tenant yourself without the need for a rental broker/agent. Craigslist listings are a must. If you don’t have the time and energy (we all have busy lives), then do some research to find a real estate broker/agent who will do a lot of the paperwork and heavy lifting.
Some advice to those who are frustrated by the hot market for multi family homes: 1.) be patient; 2) know exactly what you want and look in more than 1 market or location; 3.) use a Buyer Agent to help you in this search. Good luck!!
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