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2-4 Family Price Increases

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wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
I have just completed a duplex and 2 fourplex appraisals. Both for refinance purposes. The sales appear to be going bonkers. For example the one of the fourplex's is located in a fourplex subdivision all built 1980's early. All within 150 SF of each other. Sales 11/02 $235K, 12/02 $245K, and 06/03 $250K. I checked this against other fourplex sales from outside of the area and the trends are going up. Checked with new listings and they are even higher. So I talked to 6 listing agents that have them listed and state that they can not keep them on their hands going faster than SFR's due to investment purposes and uncertanty of the stock market. The oldest listing I have is a month old all sales sold within 30 days of listing and called on the listing that is a month old and was told that it now has 3 offers that they are considering in a bidding war.

So are others seeing this type of thing? The trend is just going up and up right now. Makes me cringe thinking when the bottom falls out or stocks go up and people don't want to buy investment properties anymore.

Ryan
 

Soar Ohio

Sophomore Member
Joined
May 8, 2002
Professional Status
Certified Residential Appraiser
State
Ohio
Day traders are now getting into real estate and driving prices up.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
We're going through a similar deal and your posting spurred me to take a look at our local "standard" duplex. Like yours, these are all fairly similar and generate about $2,800 a month, gross.

Sold 03/23/01 475,000
Sold 08/02/01 490,000
Sold 09/25/01 509,000
Sold 09/07/01 492,000
Sold 11/09/01 535,000
Sold 02/15/02 545,000
Sold 01/22/03 625,000
Sold 02/03/03 649,900
Sold 03/25/03 665,000
Sold 05/20/03 685,000
Pending 05/06/03 692,000

Six years ago, I was offered one of these at $385,000 with $5,000 down and the owner carrying the first. No thanks. I wasn't going to get talked into that deal. I couldn't shake the advice of a financial advisor who claimed that it was silly to pay more than eight times annual gross for any real estate.

But the interesting thing is that this just doesn't look like a bubble that's likely to burst, because a lot of these are being purchased with 50% or more down.
 

bradellis

Member
Joined
Jan 16, 2002
Ryan,

Yes, we are seeing a lot of money go into SRIPs. The theory behind this is that once the stock market went down so low, investors could not get what they considered to be adequate returns from the more liquid investments.

SRIPs were, and are, good alternatives. Hence the run up in prices.

Not a bubble though. For a bubble you need some irrational behavior and these folks are as rational as you can get. Might prices go down when the market recovers? Sure.

Will it "burst"? All indicators and all of history say no.

Brad Ellis, IFA, RAA
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I would say it all depends on the motives of the buyers.

If they're buying multi-family income property and then reselling for quick profits, then sooner or later some naive 'investor' will get burned.

If they're viewing the purchase for long-term income they should be okay if they're buying at a reasonable price that allows them to have some cash flow and the rental market doesn't get saturated, which could cause vacancies or rent decreases.

Given the 'get rich quick' mentality that seems to be quite common among investors these days, it wouldn't surprise me if more than a few get left holding a hot potato.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Hot segment of our market!

Just to prove I am not so smart...could have bought hundreds of them in the late 80s for around $80,000 (4 plex). Today....approaching $300,000. But they wouldn't cash flow then....wonder how they do it now????
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Let's see, interest rates are down, so these cash cows
are looking pretty good to the investment market. It doesn't
immediately show up in a GRM, but interest rate is that big component
in a cap rate, right? I've done more duplexes in the last year
than I did in the previous 5 years.

The down side to the dynamic is the exit of apartment
people into single family. I heard on a Fox business
report that apartment rents are getting soft.

elliott
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
There's always been a shortage of rentals around here and it was rare for properties to be vacant for more than a couple of days. Now, there are at least 6 or 7 properties within a few blocks that have been on the market for a month or longer.

Some people attribute it to tenants who have recently purchased. Others are blaming rapid increases in rent over the last few years, coupled with the new investors who typically try to increase rents immediately after closing.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Why rent if you can own for the same monthly payment or less?
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Originally posted by Mike Garrett, RAA@Jun 24 2003, 08:21 AM
Hot segment of our market!

Just to prove I am not so smart...could have bought hundreds of them in the late 80s for around $80,000 (4 plex). Today....approaching $300,000. But they wouldn't cash flow then....wonder how they do it now????
Oh yeeaaahhh....I remember when condos, townhouses and multi-family properties were a dime a dozen in the 80's. As I recall they tanked much worse than single family homes, but I don't remember why. Tickle my memory, Mike.
 
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