Multifamily question of the day! Should I sell now or wait a year or 2?
This is a great question. Multifamily has fared much better than other property types through the last 3-4 year recession. There many reasons why: steady income, low vacancy rates, and little new construction. Multifamily actually got a lift from an influx of home owners now forced to rent. Rents are projected to increase in coming years.
Many multifamily owners carry a misconception that their property was worth a lot more in 2003-6 (like residential) and that financing is hard to for buyers to get. In fact, multifamily financing is available and easy under 4 units and at all-time low rates. There are lots of good options over 4 units as well, (with some slightly tougher requirements) effectively requiring more down payment than in early 2000's. Check out Al Wilson's web site at www.apartmentfinancing.com
I disagree - income is income. Lower rates make Multifamily more attractive and affordable.
So hold or sell in a few years? Unless you are thinking 5 to 7 years I recommend you consider selling now. Why?
-As rates increase buyers lose buying power (10% for every 1% increase)
-CAP rates are relatively unchanged, but cost of borrowing is low so actual rate of return is excellent.
-Hobby buyers (low end) and Investors (pros) have been sitting on the sidelines with little new construction, so there is pent up demand for good income properties
-Once construction picks up alternatives and inventory will increase.
-Vacancy rates may start to rise. (3-5 years)
In summary, unless you are committed to a long term hold, now may be the perfect time to sell your multifamily property!
Doug
Questions or comments always welcome! Doug@DHFoster.com 360-920-1114
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