Investment Properties

Investment properties, or more precisely, multi-family units had been the albatross of many real estate firms and banks. And it's no wonder. With the Ponzi-schemes rampant during the later 1990's until about fall of 2005, serious investors liquidated or stayed away from that segment of the market. They knew something was afoot and for many, having survived the downturn of the 1980's, they sensed the impending bursting bubble. That banks refused to act on all the warning signs remains a question to be answered.

These last several months have seen an interesting development. Too early to yet call it a trend or turnaround, nonetheless, multi-family units are again selling. And, many of the buyers seem to be following what I've referred to these past 15 or so years as "Uncle Pete's Rule of 10". Simply put, multiply the yearly income of a property by 10 and that is the upper limit of what an investor should pay. Slice and dice the formula any way you want, Uncle Pete was right. The lower the multiple the better but paying over 10 times yearly income and a Buyer went from being an investor to a speculator: "Say, high-roller, baby". A lot of would-be investors came back from the "real estate casino" of speculative buying with just enough pocket change to make a call to a bankruptcy attorney.

But, there are signs that enough Buyers are again seriously looking at multi-family homes as sound investments to take notice. Some, looking to be owner-occupants may pay a bit more than the 10 times ratio to live in an area they find more desirable. The rest, however, seem to realize that Uncle Pete was right.