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Why This is the Best Time to Buy Investment Property


The link above is to an article from the American Apartments Owners Association.  I found it to be a good read and agreed with most of it and perhaps he is generalizing for space requirements.  I offer the following comments.


Look For Cash Flow:


Within the article the author, Russ Whitney, described his description of why so many investors lost their shirts when the bubble broke.  Like the author, I agree that when you invest, the property should perform on its own and let appreciation be the bonus, not the sole reason.  I saw the same thing he did which is what I call speculative investing.  The property didn't cash flow and the investor was betting on appreciation.  Before the collapse, I saw a lot of investors make a ton of money.  But like most investments, the higher the risk, generally the higher the return.  But unfortunately many of those who did that, continued to invest and found themselves without a chair when the music stopped.  So my personal approach likely won't make you rich over night, but I think it will help develop long-term wealth.


Single Family versus Multi-family:


I personally have pretty much followed his thoughts and invested in multi-family.  But, I don't think that needs to always be the case.  In many areas of the country, rents in comparison to sales price are very strong and performance is good.  As of late, Boise home prices in comparison to potential rents, have been strong and offer decent performance.  But for how long?  Also, I tend to follow the performance.  In 2005-2007, investor demand shot up values in most segments of the market. However, because of price point, apartment values were not as much influenced and offered stronger performance.  So I moved out of single family homes and small multi-family properties and exchanged into apartments.  I did well on the sale because of the increased values and put the money into something with equal or better performance.  Then after the market crashed and values sunk, 4- plex prices made for outstanding performance and made the best sense to me.  Although I generally agree with Mr Whitney's thoughts, it is my opinion that markets vary and no matter what market you are looking to invest in, be sure to have someone there that knows the market and can provide data to help you make the best decision.


Follow my Lead:


Unlike Mr. Whitney, I am not comfortable at all to state that if you follow my lead, you can become wealthy.  I do however believe that I can provide my clients with the information to make a well-informed decision and in general, I'd like to say that my clients have invested well.  Did some over pay?  Sure in 2005 and 2006 I helped clients perform exchanges where values were very much inflated.  But in many of those instances, those clients sold other properties for an equal or greater inflated price and the performance of the replacement property was greatly improved.


The Three Reasons Why to Buy Now:

Within the article he provides 3 reasons why we all should invest now.  I don't disagree, but things are just a little different in the Boise area.


Reason #1: Yes, distress properties were a good source for investment opportunities, but the number of distress properties has greatly reduced and with so little, we're seeing them priced at market, not at the bargain prices before.


Reason #2: Financing terms and rates are looking great and you can read past blog posts on how that may change this year.


Reason #3: The rental market is strong, but back to my conservative approach, don't bet on it always being strong.  Use historical rents and historical vacancy.  If those numbers look good, then you will be even more delighted in performance under the current market conditions.


Tony A. Drost
First Rate Property Management, Inc
Boise, ID

Tony Drost
Fair Housing

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